Lithuania, Latvia can resist devaluation

  • 1999-10-07
VILNIUS (BNS) - Lithuania and Latvia can maintain their currencies
without a devaluation, despite the ongoing economic downturn,
Handelsbanken Markets said in a research report.

"Both countries can tough it out as the experience of the early 1990s
showed," the report said. "Only if the economy deteriorates further
would such a measure appear necessary."

Estonia's kroon is seen by Handelsbanken Markets as more secure than
Lithuania's litas and Latvia's lat because of a declining current
account deficit and stronger signs of economic recovery.

With many Lithuanian and Latvian companies through the most painful
stage of redirecting their trade from the East to the West, it is not
the time for devaluation, Handelsbanken Markets said.

Devaluation could help raise the competitiveness of the two
countries' exports, but it is seen by most experts as only a
temporary gain, according to the report.

Handelsbanken Markets forecast that the Baltic countries would return
to economic growth in the second half of this year.