Lithuanian economy too hot not to see more inflation

  • 2004-09-02
  • Baltic News Service
VILNIUS - The Ministry of Finance announced that it has cut the gross domestic product growth forecasts and raised its inflation outlook for 2004 - 2005.

In 2004 real GDP growth should total 7 percent, which is in line with earlier forecasts, though forecasts for 2005 were cut to 6.5 percent.
For 2006 and 2007 the ministry has forecast GDP growth of 6.2 percent and 6 percent respectively.
"The Ministry of Finance strives to use the most relevant forecasts for the drafting of next year's budget. Moreover, we adhere to the requirement to retain the fiscal deficit below 3 percent of GDP," said Finance Minister Algirdas Butkevicius.
Lithuania currently has the fastest growing economy in both the Baltics and Europe. Last year its GDP expanded by a whopping 9 percent, and by another 7.3 percent in the first half of this year.
Naturally such rapid expansion has given cause for more acute inflationary fears.
Consequently, the ministry has raised the inflation forecast for 2004 by 10 percentage points to 1 percent, and the forecast for 2005 was boosted to 2.9 percent. The forecasts for 2006-2007 were raised by 0.4 points, to 2.5 percent and 2.9 percent respectively.
The rise in the loan portfolio of domestic commercial banks would stabilize next year amid a growth in interest rates.
Moreover, the shutdown at Ignalina Nuclear Power Plant is expected to subtract an additional 0.3 - 0.4 percentage points from the expected rise in GDP.