Balance of Payments of the Republic of Lithuania, February 2007

Current Account Balance.

In February 2007, the country’s balance of payment current account deficit (CAD) amounted to LTL 1.03 billion, an increase of LTL 398.2 from January 2007 and LTL 632.3 million above the figure in February 2006 when CAD made up LTL 396.4 million. In January-February 2007, CAD amounted to LTL 1.66 billion, by three fourths above the figure for corresponding period in 2006. The widening of the CAD in February 2007 was determined by a significant growth of the external trade gap. The decrease of the positive balance surplus of current transfers was offset by the increase of the positive balance surplus of services and decrease of income balance deficit.

According to the preliminary data of the Department of Statistics under the Government of the Republic of Lithuania, in February 2007, export of goods decreased by 5.3 per cent, while import of goods went up by 3.9 per cent month on month. In February, external trade deficit grew by 28.7 per cent compared to January. And the deficit doubled compared to February last year. In January-February 2007, annual growth of export and import of goods made up 8.3 per cent and 23.2 per cent respectively. Export to the EU states accounted for 68.6 %, slightly more than two thirds of the Lithuanian export of goods, while import made up 65.6 per cent. Export to the CIS countries made up 21.9 per cent and import accounted for 23.7 per cent.

In January-February 2007, the list of Lithuania’s key export partners included Russia (13.7%), Latvia (12.1%), and Germany (11.4%), while key import partners were Russia (20%), Germany (14.1%) and Poland (10.1%).

In the first two months of 2007, the top positions on the goods export list were occupied by mineral products (13.4%), machinery, mechanical and electrical equipment (12%), vehicles and associated transport equipment (10.2%). The said groups of goods also accounted for the largest share in imports (18.2%, 16.2% and 15.8% respectively).

In February 2007, exports of services declined by 7 per cent and imports of services contracted by 13.3 per cent month on month. Eventually, total balance surplus of services went up by LTL 121.2 million to reach LTL 220.5 million in February. In January-February the year-on-year exports of services expanded by 7.7 per cent and imports of services grew by 12.2 per cent.

Payments to non-residents (on their investment in Lithuania) equalled to LTL 229 million in February 2007 versus LTL 265.7 million in previous month, while the income of domestic economic entities on investment abroad made up LTL 87.9 million versus LTL 92.5 million in January. In February, the deficit of the investment income balance narrowed by LTL 32.1 million. Since the surplus of compensation of employees changed only slightly, total income balance deficit for February 2007 went down by LTL 31.9 million to LTL 107.1 million in February.

The surplus in the balance of current transfers amounted to LTL 84.4 million in February 2007 versus LTL 272.8 million in January of the same year. The major reason behind the decrease was an increase of the size of transfers from Lithuania. Meanwhile, in February, overall amount of transfers to Lithuania went down by LTL 18.3 million. During the month, transfers from EU support funds made up LTL 159.2 million, while individual transfers amounted to LTL 117.8 million. In January-February 2007, the said transfers formed respectively LTL 321.4 million and LTL 178.1 million, a year-on-year increase of LTL 124.1 million and LTL 65.4 million respectively.

Capital and Financial Account Balance.

In February 2007, excluding official reserve assets, the flow of investments by national economy agents in other countries equalled to LTL 1.1 billion, a month-on-month rise of LTL 1.8 billion). In February, foreign investment flow in Lithuania made up LTL 1.45 billion, an increase of LTL 978.2 million compared to January. Net total investment flow (both outward and inward investments) made up LTL 350.6 million in February. Non-repayable capital transfers from the EU support funds amounted to LTL 70.6 million the same month and LTL 202.3 million in January-February.

In February 2007, foreign direct investment flow in Lithuania reached LTL 408.8 million. Taking into account foreign direct investment by domestic economic entities, net foreign investment flow made up LTL 387 million in February and foreign direct investment flow in Lithuania rose to LTL 1.04 billion litas in January-February from LTL 354.6 million in the corresponding period in 2006. The increase of investments was determined by buying up shares of some companies from small investors; however, it led to the contraction of investment portfolio liabilities to non-residents.

Net portfolio investment flow was negative at LTL 200.9 million in February 2007. This was the result of both an increase of this type of investments in other countries and negative investment flow in Lithuania.

The net flow of other investment and financial derivatives was positive in February amounting to LTL 672.6 million. The largest impact on the total positive flow of the investment was determined by the increase of short-term liabilities of the domestic monetary financial institutions (their flow amounted to LTL 1.26 billion in February).

In February 2007, official reserve assets flows in the balance of payments was negative at LTL 348.95 million. The major reason behind the decrease of official reserve assets was the contraction of the deposits of other monetary financial institutions and central government with the Bank of Lithuania respectively by LTL 316.9 million and LTL 196.8 million, as well as the drop of LTL 40 million in the external liabilities of the Bank of Lithuania.

The official reserve assets were pushed up by the increase of currency in circulation (LTL 173.8 million) and other factors (LTL 48.8 million).