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Economy in Brief


Recession In Lithuania Bottoming?

by Louise Curley September 28, 2009

Along with the other Baltics, Estonia and Latvia, Lithuania, having pegged its currency to the Euro has been unable to devalue its currency to gain a competitive advantage. Instead it has been forced to deflate its economy with the result that it has suffered one of the most severe recessions in the European Union. Real Gross Domestic Product was down 13.4% from a year ago in the first quarter of this year and was down 20.2% in the second quarter, as shown in the first chart. The Central Bank Governor, Reinoldijus Sarkinas, reported yesterday that the economy is close to bottoming out and could see some growth next year, given positive external conditions. The one bright spot in the Lithuanian economy has been the improvement in the balance of payments in goods and services, as shown in the second chart..Data released today on retail sales show that although sales in August are 19.6% below a year ago, they are slightly below the peak decline of 21.1%, as can be seen in the third chart. While not particularly encouraging, the decline is not getting worse. The July data on manufacturing new orders are somewhat more encouraging. While domestic orders have fallen more than foreign order, they appear to be recovering faster than the foreign orders as shown in the fourth chart.

  Aug 09 Jul  09 Jun 09 May 09  APR 09  Mar 09  FEB 09 Jan 09
Retail Trace ex motor vehicles and motorcycles   -19.6 -19.6 -19.2 -19.8 -18.4 -21.1 -20.0 -16.2
Manufacture 's New Orders                
  Domestic  (y/y %)   -38.64 -38.00 -41.48 -47.16 -43.15 -47.93 -41.38
  Foreign     (y/y %)   -38.41 -42.37  37.44 -36.45 -30.95 -24.55 -34.75
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