Agency says Lithuania will have soft landing

  • 2008-05-22
  • From wire reports
VILNIUS - Standard & Poor's, a rating agency, has predicted that Lithuania's economy would likely undergo a soft landing, with GDP growth amounting to 4 percent this year.
After fresh data showed that Estonia's economy nearly flattened out in the first quarter and Latvia's is showing signs of braking fast, the news was a breath of fresh air for the Baltics.
Standard and Poor's credit analyst Eileen Zhang said that Lithuania's economic development would slow down considerably in coming years, though there was a 50-70 percent probability that the slowdown would not be drastic.

By comparison, it would appear that Estonia and Latvia's economies have entered a hard-landing scenario, with double-digit growth plummeting to less than 2 percent.
Under Lithuania's soft-landing scenario, the growth of gross domestic product should slow down to 3.7 percent this year and reach some 3 percent in both 2009 and 2010, according to Standard & Poor's.
She said exports should take up the key role in the economy, while financial resources should be refocused on export-oriented spheres, away from domestic consumption, which would boost competitiveness in the long term and lay the foundation for development in the future.

According to Zhang's estimates, Lithuania's inflation should hit 10 percent this year and decrease to 7 percent in 2009 and 5.2 percent in 2010.
Inflation hit a decade-high of 11.9 percent in April and appears poised to continue its upward trajectory. Lithuania now boasts the third-highest inflation in the EU after Latvia and Bulgaria.
Economic slowdown might prompt changes on the labor market with migration from the construction sector to manufacturing or even agriculture possible.

Efforts to withstand pressure would be supported by a low level of public debt and rather cheap financing provided by Scandinavian banks, Zhang said.