VILNIUS - A data revision has revealed Lithuania's economy shrank by more than previously thought in the first quarter, with the prime minister warning the contraction for 2009 could be as much as 15 percent, Reuters reported.
"There are some signals the recession could be deeper than the last forecast of the Finance Ministry," Prime Minister Andrius Kubilius said of the original 10.5 percent contraction for the year predicted.
The extent of the crisis was revealed when revised first quarter data showed a 13.6 percent drop in gross domestic product (GDP). The figure is worse than the first estimate of a 12.6 percent fall and means a drop of 2.2 percent against the last quarter of 2008.
"Our strategic goal is to have the euro as soon as possible, but it would not be very prudent to give an exact date, when the recession can be as high as 12 or 15 percent," he said.
Kubilius said, given a good run, Lithuania could have the euro by 2011, but was cautious on making further budget cuts, citing a need to cap the deficit, as he did not want to send the economy into a downward spiral.
"The euro is a very important instrument, but the goal is a good economy and better life, not just to have euro banknotes instead of litas," he said.
On a quarterly basis, the drop was 10.5 percent, worse than a preliminary estimate of -9.5 percent. The statistics office said all sectors were down in the first quarter. Household spending also fell 15.1 percent from a year ago.
Finance Minister Algirdas Semeta said on May 27 the country plans to launch a 500-600 million euro Eurobond in the "coming weeks."
"We are planning to go to the market. We expect that currently there is a window of perception in the market that is very much better," Semeta, who recently survived an interpellation bill, said.
Lithuania dropped plans for a 400 million euro Eurobond issue last year amid the global financial turmoil, but needs to fund a widening budget gap.
The first quarter revenues from Value Added Taxes (VAT) fell short of targets leaving the government scrambling to come up with extra cash.
"Our credit default swaps have fallen ... and reached levels which they were at six months ago, so we think that there is a possibility to enter international markets rather soon," Semeta said.
"We consider a rough size between 500 and 600 million euros. Below 500 million would probably be too small," he said.
Lithuania has chosen Citibank, Credit Suisse and RBS as lead managers on the Eurobond.
The Baltics are in the grip of their worst post-Soviet recession due to the global credit crunch.
The problems in the region have also overwhelmed top Nordic banks, which expanded rapidly in the three countries during the boom years.
Fears of problems for Swedbank and SEB, and speculation the three Baltic states could be headed for currency devaluations hit the Swedish crown and share prices in both Swedbank and SEB.