Lithuania 

Lithuania country policy

Policy established 14 February 2011

• ILC, bank guarantee or central public guarantee (unconditional)
• The country ceiling is 1500 mln euro
• Early warning signal 350 mln euro
• - of which was used as at 2011-12-31 0 mln euro

Country class: 3

Lithuania country facts

Atradius Dutch State Business Economic Research
Country Report last updated :  9 June 2010 
Country :  LITHUANIA  

Political Situation
Rather Stable

Head of state
President Dalia Grybauskaite.

Form of government
Coalition of the conservative Homeland Union-Christian Democrats (TS-LKD), Liberal Movement (LS) and Liberal and Centre Union (LCS), headed by p.m. Andrius Kubilius (70 out of 141 seats in the Seimas).

Internal Economic Situation
The Deep Recession Is Bottoming Out

General situation
In 2009 the domestic economy was hit by a deep recession: GDP fell by 15%. A collapse of export-markets and fallen consumer/investor demand on the back of restricted bank lending, peaking unemployment (11%) and plummeted property prices were at the root of  this downfall. In 2010 real GDP is falling by another 2%: whereas exports will recover, the domestic market continues to be depressed by unwinding consumer debts. Despite higher VAT/excise duties inflation has fallen to 4.4% in 2009. The privatised (Nordic owned) financial sector is badly hit by fallen property prices and a risen borrower risk; >65% of outstanding credit is in foreign currency. The sector recorded heavy losses in 2010. Unfavourable rank (58th of the 180) on the TI Corruption Index.
 
External Economic Situation
Improved But Still Fragile

Main sources of foreign exchange
Mineral products (refined oil, gas: 21%), food and animal products (12%), timber and furniture.

Main foreign markets
EU (66%, a.o. Latvia 12% and Germany 9%), Russia (15%).

Main expenses of foreign exchange
Manufactured goods (66%), mineral products (23%).

   
Balance of payments 
Because in 2009 imports contracted even faster than exports, the current account went into surplus. But due to net capital exports (net negative external borrowing by local banks from their Nordic parents) the capital balance turned into a deficit. The litas is participating in ERM2 with currency margins 30% vs euro-peg (actually only +/-1%).
External economic situation
Lithuania remains dependent on the ability/willingness of the Swedish-owned banks to roll-over the debt service due. High contagion risk from a devaluation of the Latvian lat.