Lithuania will cut back on planned increases in retirement benefits beginning next year after the government lowered its economic growth forecasts for 2012.
The Cabinet will raise pensions by half of the initially planned amount, Prime Minister Andrius Kubilius said at a news conference today. The 2012 budget draft included plans to restore pensions to the levels last seen before the global financial crisis.
The Baltic nation’s government needs to find additional measures to save about 800 million litai ($311 million) in 2012 budget plan after the Finance Ministry cut the growth forecast to 2.5 percent from a previous estimate of 4.7 percent next year. Lithuania aims to cut the budget deficit to 2.8 percent of gross domestic product from an estimated shortfall of 5.3 percent this year.
The ruling coalition rejected Kubilius’ plan to raise the value-added tax rate by two percentage points to 23 percent to plug the budget gap. The government will also cut budget spending by 4 percent to keep the deficit on target, it said.