VILNIUS - The Lithuanian economy is unlikely to improve in the second quarter of 2009, Lithuanian Finance Minister Algirdas Semeta said, explaining that the recession was "rather serious."
The Finance Ministry has revised its predictions for Gross Domestic Product (GDP) contraction to 10.5 percent from preliminary predictions of 5 percent at the start of the year.
The country's central bank expects the GDP to contract 15.6 percent.
"The second quarter won't be any easier than the first. Everyone's looking for signs of recovery but any improvements in indicators are fragmentary. It's too early to talk about a turn. This year will be very hard," Semeta told Bloomberg in London on May 15.
The three Baltic states have seen the worst recessions in the European Union, with first-quarter GDP shrinking 18 percent in Latvia, 15.6 percent in Estonia and 12.6 percent in Lithuania.
SEB Bankas announced in its Baltic Outlook that the bank expects the minimum GDP contractions for 2009 to be 9 percent in Lithuania, 14 percent in Latvia and 12 percent in Estonia.
Swedbank is more pessimistic for Lithuania, with an expected GDP contraction of 13 percent. The bank predicts a 15 percent contraction in Latvia and 9 percent in Estonia.
The bursting of the real estate bubble, tighter credit and plummeting demand in export markets have forced the three countries to take severe austerity measures in the face of the worst economic crisis since regaining independence in the early 1990s.
Risks remain to the Finance Ministry's forecast of a 10.5 percent contraction this year and the economy is unlikely to return to growth before 2012, Semeta said.
The government has already implemented budget cuts equivalent to about 3 percent of GDP in May after tax revenues to the budget fell short of expectations.
The Cabinet could tighten the budget by a further 2 billion litas (580 million euros) in June and more cuts may be needed later this year, Semeta said.
"It's difficult to say [whether they will need to revise the budget] 's despite the efforts of the government, we think they won't be able to get the 3 percent they are aiming for 's this is very difficult to achieve politically. The revenues are below targets and the economy is in a weak situation. Cuts are not materializing as fast as the ministry would hope," SEB Bankas Senior Economist Nerijus Udrenas told The Baltic Times.
Semeta said he was in London to examine opportunities to tap foreign markets. Lithuania is seeking to sell bonds in euros later this year, he said.
"There are signs that the situation is changing for the better in the markets. Some signals show that we may be successful in selling euro-denominated bonds very soon."
Lithuania doesn't intend at the moment to apply for loans from the International Monetary Fund or other international lenders, Semeta said. However, he did not rule out the possibility that such a step may be needed later this year.
The IMF has bailed out Hungary, Romania, Latvia, Belarus, Ukraine and Serbia to help the countries avoid default.
As long as Lithuania "can cope with problems ourselves, we do so," Semeta said.