Lithuania

Lithuania's fiscal consolidation drive will begin to lose some of its recent momentum after the incumbent centre-right administration of Prime Minister Andrius Kubilius will be replaced by a centre-left coalition following the upcoming parliamentary election in October. Mounting growth concerns and austerity fatigue among the electorate leave us doubtful that the prescribed 3% of GDP deficit limit will be achieved by the Lithuanian authorities in 2012. We are currently forecasting a more gradual fall below the Maastricht limit over the next three years, expecting the Lithuanian government to run a 4.7% of GDP fiscal deficit this year, down from the 5.5% shortfall recorded in 2011.

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