Macroeconomic Forecast Lithuania

In line with its strategy of early euro adoption, the Bank of Lithuania has adopted a resolution on joining ERM-2, the pre-euro exchange rate mechanism, following EU accession on May 1. The economy has maintained the stability of its currency peg against the euro and achieved low-inflation economic growth in recent years. Although a final decision on the timing of entering ERM-2 will need to be taken by ECOFIN and the European Central Bank (ECB), we believe that Lithuania will be able to sustain currency stability within ERM-2 for the requisite two-year period, and thereby be technically prepared to adopt the euro by 2006/07. However, based on a lack of clear EU support for early adoption strategies, we retain the view that Lithuania will be invited to enter the eurozone in 2007/08.

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