RIGA - Lithuania's gross domestic product surged 7.4 percent last year on strong performances in the construction, manufacturing, real estate and financial intermediations sectors, the Statistics Department announced, with approximately 50 percent of gross value added coming from these four sectors.
Though the numbers are preliminary, they demonstrate that Lithuania's economy is expanding at a relatively safe pace, unlike its Baltic neighbors, where last year's economic growth is certain to be in double-digit territory and has triggered fears of overheating. (See comment on this page.)
GDP at current prices amounted to 81.5 billion litas (23.6 billion euros), the department said, while fourth quarter GDP in 2006 increased 6.6 percent compared to the same quarter of the previous year.
GDP per capita, the most widely used indicator of relative wealth, was 24,028 litas (6,964 euros) at current prices, up 8.1 percent year-on-year.
By contrast, Estonia and Latvia's economic growth are projected to reach 11 percent, perhaps even higher in Latvia's case, a level of expansion that sounds alarm bells in economic circles. Indeed, Estonia and Latvia last year scored the highest annual inflation in the region, at 5.1 and 6.8 percent respectively.
In Lithuania, however, the consumer price index rose 4.5 percent year-on-year in 2006, which, while still robust, is manageable. Average annual inflation was 3.8 percent.
Inflation in the eurozone last year amounted to 1.9 percent, according to preliminary data.
Looking ahead, Lithuania's Statistics Department said that the overall trend is toward deceleration. "The analysis of GDP changes against the previous quarter 's less seasonal and random fluctuations 's leads to the observation of a slowing growth trend," the department said.
Analysts agreed. "The trend toward a slowdown in credit portfolio growth, which began in the second half of 2006, will continue this year," Vadim Titarenko, an advisor at DnB Nord Bank, was quoted as saying.
"The last months showed that the borrowing boom, which was the main driving force of economic growth, is about to end. Real estate prices have stabilized as well, and that has an impact on value-added growth in many other sectors," Titarenko said.
Analysts have also pointed out the alarming rate of growth of Lithuania's current account deficit. In its weekly overview dated Jan. 23, Hansabank, the largest banking group in the Baltics, wrote that the current account deficit increased 82 percent year-on-year and amounted to 9.4 billion litas. More importantly, this deficit accounted for 11.6 percent of GDP increase over the January 's November period last year, the bank wrote.
"Looking at the trend, and due to the continuously increasing foreign trade deficit, we forecast the current account deficit being more than 11 percent of GDP this year," the bank wrote.
DnB Nord Bank has forecast GDP growth in 2007 at 5.9 percent and then 5.5 percent in 2008.
SEB Vilniaus Bankas, Lithuania's largest bank, has published a remarkably different set of forecasts, with growth in 2007 amounting to 7 percent and in 2008 to 6.5 percent.
The World Bank, in its latest report issued last week, has estimated that 2007 GDP growth in Lithuania would come in at 6.3 percent, while it expects inflation to continue charging ahead and reaching 4.7 percent this year.
GDP growth - Lithuania
2001 6.6
20026.9
2003 10.3
20047.3
20057.6
20067.4
Source: Lithuanian Statistics Department
