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Lithuania May Raise VAT to Trim Deficit on Lower 2012 Growth

Nov. 30 (Bloomberg) -- 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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