(Updates with government measures from fifth paragraph.)
Oct. 10 (Bloomberg) -- Lithuania needs to implement spending and revenue measures equal to 1.25 percent of economic output to meet its 2012 budget-deficit target, the International Monetary Fund said.
Gross domestic product is slowing because of weaker export demand in the euro region, and “given the upside risks to the fiscal deficit, a contingency plan consisting of further measures should be prepared,” James Morsink, the IMF’s mission chief, told reporters in Vilnius today. The Washington-based lender expects Lithuania’s economy to expand 3.5 percent next year.
The Baltic nation’s government is drafting a budget to move Lithuania closer to euro adoption, planned for 2014, reducing the shortfall next year to 2.8 percent of GDP from an estimated 5.3 percent this year. The government may have to contend with slower growth curbing revenue as Europe’s debt crisis roiling financial markets and damps demand across the continent.
Prime Minister Andrius Kubilius said today the government needs to save 1.1 billion litai ($430 million) in budget spending and revenue to narrow the budget deficit to 2.8 percent economic output, less than the European Union’s 3 percent limit. The Cabinet aims to cut spending for ministries by 300 million litai next year, he said.
Higher income from state-owned enterprises and sales of property will boost budget revenue to help achieve the budget goal, Finance Minister Ingrida Simonyte said.
The proposed measures by the government in the next year’s budget draft are “close” to the amount suggested by the IMF, Morsink said.
The government may lower its 2012 economic-growth forecast from 4.7 percent after the European Commission releases its updated outlook in November, Simonyte said.
Lithuania will also restore pensions as planned to levels last reached before the global financial crisis in 2008. The increase will cost an additional 758 million litai in budget spending, the government said today.
The Cabinet must submit its 2012 budget plan to the parliament by Oct. 17.
--Editors: Alan Crosby, James Gomez
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