Lithuania’s slide slows on export growth

VILNIUS - Lithuania’s economic contraction, the second-deepest in the European Union last year, eased in the first quarter on growing exports and a rebound in industrial output, reports Bloomberg. Output fell a revised 2.8 percent from a year ago, compared with an April 28 estimate of a 2.9 percent drop, the Vilnius-based statistics office said on its Web site. On a quarterly basis, GDP shrank a seasonally adjusted 3.9 percent.

The Baltic nation’s decline slowed from a 12.1 percent pace in the previous quarter as industrial production rebounded after 16 months of declines and exports returned to growth. That’s boosted optimism about a recovery this year, prompting analysts from the country’s biggest bank, SEB, and the International Monetary Fund to revise their forecasts for the economy. “Revised industry, transport and retail figures resulted in a slightly easier GDP decline than previously estimated, but the overall trend remained unchanged,” the statistics office said.

Household spending fell 10 percent in the first quarter from the same period last year, while public sector expenditures shrank 0.2 percent, the statistics office said. Output of the construction industry contracted an annual 32.2 percent, the most of all categories, it said.

The Finance Ministry predicts growth of 4 percent or 5 percent this quarter from the same period last year. The IMF sees the economy growing 2 percent for all of 2010.
Exports grew an annual 10.9 percent in the first quarter, driven by sales of fuels from Orlen Lietuva, plastics and wood. Foreign sales will probably expand 7.1 percent this year from 2009, the central bank said on May 6. Industrial output, representing about 20 percent of the economy, shrank an annual 4 percent in the first quarter, improving from an 8.3 percent drop in the previous period.

Still, domestic demand is expected to remain weak in 2010, with consumption shrinking 7.9 percent, the central bank said. Falling wages, growing unemployment and government austerity measures are curbing consumer demand, with retail sales falling an annual 12.9 percent in the first quarter. Also, the closure of the Ignalina nuclear plant in December signals that a recovery may be slow, weighed down by rising energy costs for both industries and consumers.