Lithuanian Budget Deficit to Widen Under New Coalition, SEB Says

Lithuania’s budget deficit is set to widen next year, even as the Baltic nation’s new coalition pledges to trim it to less than 3 percent of economic output, SEB AB (SEBA) said.

The shortfall will probably reach 3.5 percent of gross domestic product in 2013 and 2014 after shrinking to about 3 percent this year, the Swedish bank’s Lithuanian unit said today in a report. The four-party coalition plans to adopt a 2013 budget this week with a 2.5 percent deficit.

Prime Minister Algirdas Butkevicius’s government, which took office last week, “still needs to disprove the skeptics, showing with deeds and not just words that it intends to maintain fiscal discipline,” SEB said. Pressure to implement pre-election spending pledges will make that difficult, it said.

Lithuanian GDP will advance 3.2 percent in 2013 and 3.5 percent in 2014, SEB forecast, lowering previous estimates of 4 percent growth for both years. It left this year’s forecast unchanged at 3.5 percent.

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

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