Analysts see signs of recovery

  • 2000-10-05
VILNIUS (BNS) - Lithuanian financial analysts say they see clear signs of economic recovery in the country, but warn that the economic growth will slow down without changes in investment policies.

"The positive thing is that domestic demand slightly recovered in the second quarter. That gives ground for hope that the economy will show further growth in the third quarter. But if we fail to reverse the downward trend in investment, we will not achieve economic growth," said Margarita Starkeviciute, a financial analyst. Gitanas Nauseda, an adviser to the chairman of the board of Vilniaus Bankas, pointed to the quarterly decline in exports - from 4.1 billion litas ($1.025 billion) in the first quarter to 3.9 billion litas in the second quarter - as another factor causing concern.

Nauseda cited a drop in the oil export volume, partially due to unstable operations at the country's only refinery, Mazeikiu Nafta, as the main reason for the fall in exports. Oil exports accounted for 20.9 percent of overall exports.

The Bank of Lithuania announced on Sept. 29 that Lithuania's second-quarter current account deficit narrowed by 58.8 percent, year-on-year, to 5.6 percent of GDP thanks to rapid export growth and the government's fiscal tightening.

According to preliminary estimates, the current account deficit was 4.3 percent of GDP in the first half of this year. The gap was 13.6 percent in the first quarter of 1999, and 11.1 percent in the first half of 1999.

Nauseda noted, however, that the second-quarter results were not so good and predicted that the deficit for the full year 2000 might reach 6 percent.

The consolidated budget expenditure decreased by 13 percent, and material investment expenditure fell nearly fourfold in the first half of 2000 compared with the first half of 1999, the central bank said in the statement. Nauseda said this was one of the factors restraining growth of imports.

Starkeviciute said: "The negative thing is that we see capital flow from Lithuania again - Lithuanian banks' foreign deposits increased, whereas foreign direct investment, government spending on investment goods and the import of these goods declined."

"If we managed to reverse the trend, we could easily say that the Lithuanian economy is rebounding," the analyst said.

In the first half of this year, the flow of foreign direct investment in Lithuania was 554.8 million litas, down by 47 percent from the same time last year. This was mainly due to decline in equity investment and reinvestment, according to the statement.