Danske worried about Lithuania

Jul 28, 2008
By Mike Collier

VILNIUS - While many commentators are busy repeating the theory - perhaps in hope as much as expectation - that Lithuania will escape the 'hard' economic landings lined up for Estonia and Latvia, Danske Bank has broken ranks and suggested that Lithuania might also be moving towards a hard landing scenario.

In comments released on July 28th, Danske's senior Baltic analyst Violete Klyviene said: "Today's GDP figures highlight the growing risk that Lithuania could experience a hard landing on the back of the deteriorating global economic environment, tightening credit conditions and tensions in the labour market."

Lithuanian GDP growth slowed to 5.5% y/y in Q2 08 from 7.0% y/y in Q1 08. That was "a sharper slowdown than we had expected" Danske admitted.

Industrial output and retail sales figures were both worse than Danske had envisaged. But even if a hard landing does arrive, Lithuania could still be better off than its neighbours top the North, Danske added: "We don't expect negative growth as for the other Baltic states: we forecast Lithuanian GDP growth to decelerate to an average of 4.4% y/y in the current year. A more sustainable export balance with 15% to Russia and more than 20% to all CIS countries should provide some support to GDP growth at least for this year and next."

So if Lithuania's 'hard' landing is still better than Latvia's and Estonia's, what sort of landing can they expect? Maybe the 'Quantas' variety...



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