LithuaniaSeptember 2012 | Risk Summary
A major tail risk to our generally positive outlook on economic policy continuation in Lithuania is the prospect of increasing political populism taking shape over the coming years, as a larger share of disillusioned voters feel disassociated from political discourse. Similar dynamics have taken hold across the emerging Europe region in recent years as more administrations were forced into painful austerity arrangements. For example, we note the more populist approach by policymakers in Hungary, Romania and Bulgaria in recent years, which have led to sell-offs in sovereign debt, and complicated relationships with the IMF. A strong mandate for a new government, therefore, would be a more favourable outcome for Lithuania's continued economic recovery and sustainable convergence with developed Europe.
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