Lithuania returns to growth

VILNIUS - The Lithuanian economy, which suffered the European Union’s second-deepest contraction last year, will return to growth in 2010 as exports rebound, the International Monetary Fund said, reports Bloomberg-ELTA. The economy, which probably shrank by a fifth from peak to trough during the global crisis, may expand 2.1 percent this year, the Washington-based fund said.

“Lithuania is now benefiting from the global recovery,” the IMF said. “Recent data are encouraging with signs that an economic recovery is starting to take hold.”
The government, which pushed through austerity measures equivalent to about 10 percent of gross domestic product, was able to use lower borrowing costs to avoid turning to the IMF for a loan. Real gross domestic product may return to pre-crisis levels only in 2014 to 2015, the IMF added.

“The Lithuanian economy faces important challenges of high fiscal deficits and rapidly growing public debt as well as a high stock of non-performing bank loans,” the IMF cautioned in the report. Some Lithuanian banks “are not as well provisioned and capitalized, and also face pressure on interest rate margins,” the IMF said. “Directors considered it important that banks be subjected to forward-looking stress tests to ensure viability.”