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Government admits Russian crisis' influence on economy

  • 1998-09-10
VILNIUS (BNS) - The Lithuanian administration has admitted that the crisis in Russia is taking a toll on the domestic economy and is tallying up prospective losses.

In light of the fact that settlements from Russia could be tangled up for a few months, growth of the Gross Domestic Product (GDP) in the second half of this year will be slower than in the first half due to the plausibility of a slowdown in international trade, a Friday release from the administration's press service reads.

Annual GDP growth will have to be revised down from the planned 7 to 4 or 5 percent. This means Lithuania could fail to take in some 1.2 billion litas ($3 million) in GDP.

Inflation, however, should not rise or exceed the previously stated 6 percent.

According to the data of the Finance Ministry, budgetary revenues could shrink by 300 to 350 million litas by the close of the year. This figure represents some 5 percent of the state's annual budget.

"This will not foul up finances, since reserves have been accumulated in the budget," the administration states. According to the release, the Finance Ministry has used its funds more frugally this year than it had planned.

The Finance Ministry is now putting the finishing touches on a tighter plan to limit budgetary expenditures. This contingency plan will come in handy if the crisis in Russia is dragged out and its economic repercussions for Lithuania radiate further.

Now accumulated in Lithuania there are more foreign currency resources than the total deposits of firms and residents in all the country's banks plus all the litas in circulation combined.

Budgetary reserves come to a few hundred million litas.

Sufficient financial and foreign currency reserves which have been accumulated will not allow the Russian financial crisis to spill over and spoil the Lithuanian financial or monetary systems.