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Lithuania's Economy Resumed Growth in Second Quarter, Boosted by Exports
The Lithuanian economy, which suffered the European Union’s second-worst recession in 2009, returned to growth last quarter on rising exports and expanding industrial output.
Output grew 1.1 percent from a year ago after a 2.8 percent contraction in the first quarter, the Vilnius-based statistics office said in a statement today. The median estimate of five economists in a Bloomberg survey was for a 1 percent annual decline. On a quarterly basis, gross domestic product gained a seasonally adjusted 2.9 percent.
The Baltic nation’s economy came back to life after contracting for six consecutive quarters and suffering a 14.8 percent slump last year, the deepest recession since the early 1990s. Exports and industrial output expanded as global trade improved and wage cuts helped increase competitiveness.
“It is quite unexpected to see such positive results that were much better than our forecast and the consensus,” said Violeta Klyviene, chief Baltic economist with Danske Bank. “Improving export trend is making a very positive impact.”
The other Baltic nations, Latvia and Estonia, are also rebounding. Latvia returned to quarterly expansion in the first quarter and Estonia exited its recession in the final quarter of last year. Estonia will adopt the euro in January after narrowing its deficit last year to 1.7 percent of GDP helped by the government’s austerity program.
Kubilius Content
The recovery is taking hold even after Lithuanian Prime Minister Andrius Kubilius pushed through spending cuts to cap the budget deficit, undermining domestic demand. Consumer spending will remain weak in 2010, with consumption shrinking 7.9 percent, the central bank estimates. The yield on Lithuania’s 10-year bond fell 0.22 percentage point to 6.08 percent today.
“I’m content with the results of the economic recovery,” said Kubilius in an e-mailed statement today. “This confirms that we are going in the right direction and that the Lithuanian economy is exiting the crisis. We need further effort and time to contain unemployment and budget deficit challenges.”
Industrial output, representing about 20 percent of the economy, grew an annual 4.5 percent in the second quarter, compared with a 4 percent drop in the first quarter.
In May, the Finance Ministry predicted annual growth of 4 percent or 5 percent in the second quarter. The International Monetary Fund sees the economy growing 2.1 percent for all of 2010, the most optimistic estimate amongst major forecasters. The government expects a 1.6 percent expansion for the year.
The statistics office may revise today’s figures when it publishes a detailed breakdown for the quarter on August 27.
To contact the reporter on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net
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