Macroeconomic Forecast Lithuania

Strong growth has been accompanied by a considerable increase in the current account deficit, the result of a widening trade deficit and decreased surpluses in the services and current transfer balances. The current account deficit stood at 10.0% of GDP during H104, up from 6.2% during the same period of 2003. Import growth was partly driven by private demand, with imports of consumer goods up 24.1% y-o-y during H1, facilitated by a three-fold increase in the amount of consumer loans granted by banks in Lithuania. While excessive increases in debt will be viewed with caution by the central bank, the rise in the half-yearly current account shortfall owes much to the accumulation of stocks by businesses prior to EU accession. More recent months have seen the trade gap fall to the more sustainable levels of last year and we expect this trend to continue.

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