Lithuania May Raise VAT to Trim Deficit on Lower 2012 Growth

Lithuania’s Finance Ministry lowered its forecast for the economy next year as European demand for exports wanes and said slower growth may require an increase in value-added tax to meet the government’s budget-deficit target.

Gross domestic product will probably expand 2.5 percent in 2012, compared with a September forecast of 4.7 percent, the ministry, based in the capital, Vilnius, said today in an e- mailed statement.

As a result, Finance Minister Ingrida Simonyte said additional budget measures will be needed to meet a planned 2012 deficit goal of 2.8 percent of GDP, with no “other serious alternatives” to higher VAT, the Baltic News Service reported. The tax may be raised by 2 percentage points to 23 percent, she added, according to BNS.

Lithuania’s economy expanded 6.7 percent from a year earlier in the third quarter, the second-fastest rate in the European Union. Growth in the Baltic nation, which sells 61 percent of its exports to the 27-member bloc, will slow to 3.4 percent next year, the European Commission estimates.

To contact the reporter on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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