Bloomberg News

Lithuanian Central Bank Raises GDP-Growth, Inflation Forecasts

May 10, 2012

Lithuania’s economy will expand more than previously estimated as the labor market improves and domestic demand strengthens, the central bank said.

Gross domestic product will probably rise 3 percent this year, compared with a February estimate of 2.2 percent, the Vilnius-based Lietuvos Bankas said in an e-mailed statement today. Growth may accelerate to 3.5 percent in 2013, compared with a previous forecast of 3.3 percent, it said.

The Baltic nation’s economy advanced at a faster rate than expected in the first quarter, expanding a preliminary 3.9 percent, prompting banks including SEB Bank AB (SEBA) to revise the country’s growth forecasts higher. Slowing unemployment and strengthening consumer confidence is helping boost domestic demand.

“Domestic demand, in particular, private consumption expenditure, is rising more than anticipated,” the central bank said. “Although the world economic outlook is still surrounded by uncertainty, the outlook for Lithuania is now viewed more favorably, mostly owing to stronger-than-expected recent growth.”

The yield on Lithuania’s dollar bond due 2022 fell 0.03 percentage point today to 4.98 percent.

SEB, Lithuania’s largest bank by assets, revised its economic-growth forecast for Lithuania to 3 percent on May 8, while the Finance Ministry kept its estimate unchanged at 2.5 percent on April 3.

Industrial output rose 3.8 percent in the first quarter from a year earlier, after a 2.5 percent contraction in the final three months on 2011. Retail sales increased an average 8 percent in the first quarter from the same period last year.

The central bank also raised the inflation rate forecast for this year to 2.9 percent from a previous 2.1 percent and revised 2013 estimate to 2.7 percent from 2.4 percent.

Consumer-price growth slowed to 3.2 percent in April the lowest rate in 14 months, helping shore up domestic consumption and economic expansion. Lithuania needs price growth to ease to qualify for planned euro adoption in 2014.

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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