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Lithuania GDP Gains 3.7% as No. 2 EU Growth Pace Set to Slow

July 30 (Bloomberg) -- Lithuania’s economic expansion fell short of analysts’ estimates as the Baltic nation struggles to maintain the European Union’s second-fastest growth pace.

Gross domestic product grew 3.7 percent in the second quarter from a year earlier after a 3.5 percent gain in the previous three months, the statistics office in the capital, Vilnius, said today by e-mail. The median estimate of four economists in a Bloomberg survey was 4.2 percent. GDP rose a seasonally adjusted 0.6 percent from the first quarter.

A slowdown may put at risk Lithuania’s goal of adopting the euro in 2015 by complicating government efforts to reduce the budget deficit below the required limit of 3 percent of GDP, according to the central bank. Lithuania’s economy is on the verge of deceleration as weak consumer confidence and investment are compounding deteriorating demand in Russia and other key export destinations in Europe, according to DNB ASA and SEB AB.

“More challenges than opportunities loom,” Vilija Tauraite, SEB’s chief Lithuania economist in Vilnius, said by e-mail. “After outstanding results earlier, it’s getting harder and harder to squeeze out more of the same growth.”

The yield on Lithuania’s euro-denominated bonds due 2018 rose to 2.634 percent from 2.602 percent at 2:10 p.m. in Vilnius. The cost to insure state debt against non-payment for five years using credit-default swaps rose two basis points to 126, data compiled by Bloomberg show.

Euro Adoption

Lithuania is set to become the last of the three Baltic countries to join the euro region, with Estonia making the switch in 2011 and Latvia winning approval this month to become the 18th country in the currency union on Jan. 1, 2014.

The EU forecasts the economies of Latvia, Lithuania and Estonia this year will grow 3.8 percent, 3.1 percent and 3 percent, respectively, the fastest in the 28-member bloc. The Baltic countries also led the EU in 2012 with expansions of 5.6 percent in Latvia, 3.7 percent in Lithuania and 3.2 percent in Estonia.

“Lithuania’s expansion in the second half of this year will be much slower,” Jekaterina Rojaka, DNB’s Baltic economist, said by e-mail. “Last year’s record harvest is unlikely to repeat, the base for export statistics is unfavorable, domestic consumption is lethargic, the job market’s clearly unbalanced and the investment drought is continuing.”

The Finance Ministry projects GDP growth will slow to 3 percent in 2013, while the central bank forecasts 2.8 percent expansion.

The statistics office is due to release a breakdown of second-quarter GDP data on Aug. 29.

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

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