Lithuania's economics worries neighbors

Apr 29, 2008
In cooperation with BNS

VILNIUS- Lithuanian retailers are continuously observing a weakening consumption in neighboring Latvia and Estonia in recent months, it is afraid that Lithuanian consumers will soon start tightening their belts as well, the Lietuvos Rytas daily reported on Monday.

Following in the footsteps of Estonia and Latvia, the central Bank of Lithuania and several commercial banks are expected to release their revised 2008 GDP growth forecasts, in early May.

The central bank predicted at the start of this year that the economy would expand by just over 8 percent in 2008, which is close to last year's growth rate. The Finance Ministry's growth forecast was more modest, at 5.3 percent.

Vadim Titarenko, advisor to the president of DnB Nord Bankas, said that it was difficult to predict at what rate Lithuania's economy would expand.
He noted that Lithuania's marine and rail transport industry continued to operate successfully, due partly to a worsening of Russia's relations with Estonia, and that the country's retail sales recorded an "astonishing" growth rate for the first months of the year.

The analyst said that in any case, Lithuania should be in a better situation than Estonia.
"If Lithuania's growth rate reached 5 percent, that would not be a bad scenario. If the results are worse than that, this will lessen our chances of catching up with Western Europe at a faster rate," he said

Lithuanian-owned retail chains Maxima, Topo Centras and Apranga have already started to feel the pinch of weakening consumer spending in the neighboring Baltic countries.
"Apranga's overall sales revenue in these states continues to growth, since we have opened more stores. But if we look at figures for some older stores, we see an annual decline of around 10 percent that their first-quarter revenue," Lietuvos Rytas quoted Rimantas Perveneckas, the company's CEO, as saying.

Topo Centras, which has a chain of 17 stores in Latvia, recorded a 10 percent drop in revenue as well. Ceslovas Steigvila, the chain's CEO, noted a decline in Latvian sales of household appliances, such as refrigerators and washing machines.

"This could be attributed to the dormant real estate market. Also, the tightening of credit standards by banks has lead to a decline in lease-to-own purchases," he said.

"People give priority to buying food products and postpone purchases of more expensive items until better times," said Giedrius Juozapavicius, the head of the Image and Communications Center of the Maxima Group, commenting on the recent changes in Latvia and Estonia.