Survey forecasts higher inflation

VILNIUS - Evaluating and predicting the ebbs and tides of the macroeconomic world is no easy task. The Lithuanian department of statistics has its take on what is and what's to come, but its version is not the only one available.

On Nov. 25, an influential nongovernmental organization called the Lithuanian Free Market Institute presented the results of its fourth survey of macroeconomic variables (including GDP growth, inflation, unemployment, the shadow economy and average personal earnings) in Lithuania.

In each survey, the institute collects the estimates and forecasts of about 50 market participants, or "experts" as the LFMI calls them, and comes up with a set of figures which usually vary from the official statistics.

"The experts know most about the [economic situation] because they are actually participating in the market," said Guoda Steponaviciene of the LFMI.

The market participants forecast a 2.2 percent growth by the middle of the year 2000. Official forecasts are slightly more pessimistic with GDP growth in 2000 and expect it to be 2 percent.

As far as inflation goes, the experts put it at 2.6 percent in the first half of 1999, which is about four times higher than the official figure. For the first half of 2000, the market participants are projecting it to be 3.9 percent while the official prediction for the year is 3.5 percent.

The LFMI's survey respondents also forecast a slight growth in urban unemployment, a tiny increase in household income and a rise in interest rates on six-month and 12-months loans in litas.

Despite the less than ideal economic and financial situation currently existing in the country, LFMI representatives pointed out that private enterprises are still able to survive and adjust.

"The situation in the private sector is fairly good," said Elena Leontjeva, president of the LFMI. "This shows that the processes inherent in the market are already working in Lithuania."

However, the well-known head of the institute added that the state's financial picture needs a significant amount of tinkering.

"One of the things needed to eliminate the crisis inside the country is to trim the budget," said Leontjeva.

Because of the state's financial woes, the Parliament recently decided to postpone a compensation program for two years. People who saw their ruble savings in the state-owned Taupomasis Bankas evaporate in the early 1990s were supposed to receive up to 6,000 litas ($1,500) each in compensation. Now they will have to wait longer.

Still, Leontjeva suggested that if the state plans to use that money just to cover other expenditures, instead of reducing spending, it would be better to give this money to those unlucky folks who lost their savings.

But to start hammering away at the growing state debt, Leontjeva said more moves than simply whittling down the state budget were necessary.

"We propose that the state not only trim the budget but revise state investments," said Leontjeva. "Also remaining enterprises that are state-owned should be privatized. This should be done quickly and not wait until these enterprises accrue more losses than they have now."