Economists forecast decline

  • 1999-07-29
VILNIUS (BNS) - The low GDP growth may lead to a higher budget deficit and a recession in Lithuania's economy, predict financial analysts.

The low GDP growth of 1 percent to 2 percent and average annual inflation of 2 percent, means that the national budget will have about 1.5 billion litas ($375 million) to 2 billion litas less funds than forecasted, financial analyst Margarita Starkeviciute predicts in the Lithuanian daily Lietuvos Rytas.

She warns that if the problems with the petroleum market are not solved and exports fail to materialize greater incomes, growth will be negative - in starker terms, an economic recession.

The article claims that over the first five months of this year the central consolidated deficit of state accounts was 1.59 billion litas. The former ruling coalition in April alone spent 849 million litas in deficit, as much as was foreseen for the entire year.

To cover this deficit and to refinance older loans, the government borrowed 2.7 billion litas from domestic banks. That equals almost the entire sum of time accounts held in banks.

Starkeviciute says Privatization Fund funds have already been eaten up.

The analyst adds that if institutional reform is not executed and state enterprises are not consolidated, giving most of their functions over to private hands, and if other radical measures are not taken in the country, the deficit of the current account will remain at about 8 percent to 10 percent of GDP. That will make borrowing more expensive and threatens the national currency's stability.

Starkeviciute suggests formulating a real budget and carrying out tax reforms, dramatically reducing budget outlays in all areas.