Bank of Lithuania
2003-09-25

Current Account.

According to preliminary data, in Q2 2003 the Balance of Payments CAD made up LTL 1.07 billion and stood at LTL 1.52 billion for the first half of the year. Compared to Q2 2002, in Q2 2003 the CAD widened by LTL 277.2 million and amounted to 7.9 per cent of the GDP. The CAD for the first half of 2003 made up 5.9 per cent of GDP.

CAD and CAD to GDP ratio

 

CAD, LTL million

CAD to GDP ratio, %

2002

2,670.59

-5.2

Q1

-512.58

-4.6

Q2

-792.41

-6.2

1st half

-1,304.99

-5.5

Q3

-177.20

-1.3

Q4

-1,188.40

-8.9

2003

   

Q1

-448.88

-3.7

Q2

-1,069.62

-7.9

1st half

-1518.5

-5.9

While the foreign trade deficit contracted considerably in the first half of 2003, as compared to the same period of 2002, the widening of the CAD was brought about by a marked increase of the negative income balance.

Development of the current account balance, composite balances, including factors influencing development of the account

 

First half of 2003, LTL million

First half of 2002, LTL million

Change, %

Factors

CAD

-1,518.50

-1,304.99

16.4

16.4

Trade balance

-1,800.84

-2,256.88

-20.2

-34.9

Balance of services

832.69

959.19

-13.2

9.7

Income balance

-1,025.08

-417.96

146.3

46.5

Balance of current transfers

474.73

410.66

15.6

-4.9

Foreign Trade.

According to the preliminary data of the Department of Statistics, in Q2 2003, compared Q1 2003 and Q2 2002, export of Lithuanian goods decreased respectively by 5.1 per cent and 5.9 per cent. However, owing to fast export growth in Q1 2003, export growth for first half 2003, compared to first half 2002, reached 6.7 per cent. Import of goods increased by 2.3 per cent during the period under comparison. Such developments were mostly determined by the increased exports of intermediate and investment goods and imports of intermediate goods and investment goods. Owing to protectionist customs policies in Russia, import and re-export of passenger motor cars declined considerably. Excluding petroleum products, export of goods grew by 8.5 per cent, and import of goods went up by 2.4 per cent during the period under review.

Development of export and import of main groups of goods and determining factors

January?June of 2003, compared to January?June of 2002, %

 

Exports

Imports

 

Change

Impact of factors

Change

Impact of factors

Total goods

6.7

6.7

2.3

2.3

Investment goods

33.8

3.3

9.3

1.7

Intermediate goods

7.1

3.5

5.7

3.1

Consumption goods

5.8

1.6

1.7

0.3

Petrol

-4.8

-0.3

83.0

0.0

Passenger motor cars

-13.6

-0.9

-18.8

-1.5

Other goods

-84.2

-0.5

-60.5

-1.2

Development factors of export of goods by country unions

(by export flows of goods)

January?June of 2003, compared to January?June of 2002, %

 

Total

EU

CEFTA

EFTA

CIS

Other

Russia

Germany

Latvia

Estonia

USA

Impact on export by country

6.7

-3.7

0.1

12.2

-2.0

0.2

-1.0

0.4

1.1

0.5

0.3

Total export

6.7

-7.5

2.5

50.3

-9.7

0.7

-7.7

3.9

13.1

11.3

9.0

Live animals and animal products

0.5

0.4

-0.7

-0.9

-0.4

2.3

-0.3

2.0

-0.3

0.8

19.2

Vegetable products

0.5

0.3

-0.2

1.9

0.5

0.9

0.7

0.4

0.1

1.4

0.1

Prepared foodstuffs, beverages and tobacco

0.5

0.5

1.2

1.5

2.6

-1.6

4.4

-1.4

-3.3

-2.3

-0.2

Mineral products

-0.1

-22.6

-10.0

464.2

-2.2

3.8

0.0

0.1

10.3

-1.0

0.1

Products of chemical industries

0.7

2.0

2.2

-2.1

-1.0

-0.5

-1.3

1.1

0.5

1.1

0.4

Plastics and articles thereof

0.2

0.5

3.5

0.4

-1.2

-0.1

-1.6

0.9

0.5

0.0

-2.0

Wood and articles of wood

0.6

1.7

-1.4

3.7

0.0

-1.2

0.0

1.3

0.4

1.8

-4.3

Textiles and textile articles

-0.6

-1.1

0.0

3.3

-1.1

0.3

-1.8

-2.7

-0.4

0.3

4.2

Machinery and mechanical appliances

1.0

1.8

5.9

8.6

0.2

-2.1

1.8

-0.5

0.7

0.3

-0.6

Vehicles

1.6

6.2

-0.6

30.6

-6.2

-4.0

-11.2

2.9

2.6

6.3

-10.7

Other goods

1.8

2.9

2.4

-8.9

-0.8

2.7

1.6

-0.3

2.1

2.6

2.8

Development factors of import of goods by country unions

(by import flows of goods and country of consignment)

January?June of 2003, compared to January?June of 2002, %

 

Total

EU

CEFTA

EFTA

CIS

Other

Russia

Germany

Latvia

Estonia

USA

Impact on import by country

2.4

0.4

0.9

-0.4

0.4

1.2

0.5

-0.7

0.5

0.6

1.1

Total import

2.4

0.6

8.2

-12.3

5.0

7.0

9.9

-3.2

12.3

16.6

57.5

Live animals and animal products

-0.1

-0.3

0.2

-1.1

-0.1

0.8

0.2

-0.1

0.6

2.3

-0.8

Vegetable products

0.4

0.1

0.0

0.1

2.8

0.4

2.4

-0.3

-0.4

-1.2

3.4

Prepared foodstuffs, beverages and tobacco

0.4

0.4

0.1

0.2

0.2

1.0

0.4

0.2

-0.1

2.7

-0.5

Mineral products

0.1

0.0

-1.2

1.1

2.9

0.1

7.2

0.5

0.8

-0.5

-2.1

Products of chemical industries

0.1

-0.5

0.9

-0.3

0.6

1.7

0.4

0.2

1.1

0.8

5.5

Plastics and articles thereof

-0.1

0.0

0.0

-2.0

-0.7

0.3

-0.1

0.0

0.4

0.0

-0.4

Wood and articles of wood

-0.1

0.3

1.1

1.1

-1.5

-0.4

-2.8

0.4

-0.6

-1.3

0.0

Textiles and textile articles

0.0

-0.0

-0.2

-0.1

0.0

0.0

-0.1

0.0

-0.2

0.1

-1.4

Machinery and mechanical appliances

-0.9

-0.6

-1.1

-19.9

-2.0

2.3

-1.8

-5.4

4.8

6.2

62.1

Vehicles

-0.2

-0.3

0.0

-0.2

-0.6

0.2

0.0

-0.1

-0.2

1.4

0.6

Other goods

2.5

1.6

8.2

8.8

3.3

0.6

4.1

1.5

6.1

6.3

-8.8

Main foreign trade partners of Lithuania

Export, LTL million

Main foreign trade partners of Lithuania

Import, LTL million

Services.

While, compared to Q1 2003, export of services increased by 24.3 per cent during Q2 2003, it declined by 8.1 per cent in comparison with Q2 2002. During first half 2003, compared to the same period last year, export of services declined by 9.4 per cent, and import of services went down by 7.1 per cent. The total positive balance of services amounted to LTL 582 million in Q2 2003 (LTL 457.1 million in Q2 2002) and stood at LTL 832.7 million for the first half of the year (LTL 959.2 million in first half 2002).

This decline was determined by the contraction of exports of two main kinds of services ? transport and travel. During first half 2003, export of transport and travel services accounted for 48.6 and 32.6 per cent of the total export of services, respectively. In first half 2003, compared to the same period last year, export of these services declined by 5.5 per cent and 10.1 per cent, respectively. The largest decline was recorded in the export of sea transport services (16.6%). Export of road transport services declined by a mere 0.3 per cent. Compared to first half 2002, the number of foreigners visiting Lithuania declined by 6.7 per cent, while the number of Lithuanian residents leaving the country by 0.6 per cent. The positive travel balance made up LTL 168.5 million (LTL 255.1 million in first half 2002).

Income.

The negative income balance in Q2 2003 made up LTL 496.3 million, LTL 1.03 billion in first half 2003. Compared to the relevant periods of 2002, the negative income balance in Q2 2003 widened by LTL 222.8 million (81.5%), and by as much as LTL 607.1 million in first half 2003, or nearly by a factor of 2.5. The exceptional characteristic of the income balance in the first half of the year was a sharp increase in dividends to non-residents for foreign direct investment and reinvestment (which is recorded in the current account of the Balance of Payments as payments to non-residents, and is reflected in the financial account as part of foreign direct investment). Compared to the first half of 2002, the amount of dividends to non-residents increased by LTL 375.2 million (nearly by a factor of 4), while reinvestment went up by LTL 133.4 million (97.2%). The increased dividend payments, alongside growing reinvestment, show that the profitability of foreign direct investment companies has gone up.

Current transfers.

The balance of current transfers was positive during first half 2003 and stood at LTL 474.7 million, of which LTL 356.3 million in Q2 2003 (LTL 410.7 million in first half 2002).

Capital and financial account.

The capital and financial account balance made up LTL 1.17 billion in first half 2003 (LTL 701.6 million in Q2).

Investment abroad.

Investment abroad by Lithuanian economic entities declined in Q2 2003 by LTL 101.8 million, and LTL 128.1 million in first half 2003. Domestic commercial banks increased their investment in non-resident debt securities by LTL 37 million in Q2 2003, while their correspondent account balances with foreign banks went up by LTL 324.2 million. However, due to the decline of investment in Q1 2003, bank investment abroad in first half 2003 went up by only LTL 32.4 million. Investment abroad by other Lithuanian economic entities declined in Q2 2003 by LTL 216.6 million, increasing by LTL 104.2 million in first half 2003.

Foreign investment in Lithuania.

Total foreign investment flows were negative in Lithuania in Q2 2003 (LTL 182.6 million), yet, owing to large positive flows during the first quarter, foreign investment flows in the first half of the year amounted to LTL 1.64 billion. Compared to first half 2002, foreign investment flows declined by LTL 663.9 million. These changes in foreign investment flows were determined by the contraction of foreign direct investment and other foreign investment in Lithuania.

Development of the capital and financial account and composite balances, including factors influencing development of the account

 

First half of 2003, LTL million

First half of 2002, LTL million

Change, %

Factors

Capital and financial account balance (with errors and omissions)

1,518.5

1,304.99

16.4

16.4

Capital account balance

106.03

69.92

51.6

2.8

Direct investment

1,059.02

1,473.94

-28.2

-31.8

Portfolio investment

748.43

810.67

-7.7

-4.8

Financial derivatives

-54.32

3.04

-1,886.8

-4.4

Other investment

-240.87

117.39

-305.2

-27.5

Reserve assets

-444.5

-1,794.25

-75.2

103.4

Errors and omissions

344.71

624.28

-44.8

-21.4

Foreign direct investment flows in Q2 2003 made up LTL 551.6 million, LTL 1.08 billion in first half 2003. Compared to first half 2002, these investment flows declined by LTL 414.9 million. More than three quarters of foreign direct investment flows in first half 2003 consisted of other capital inflows (loans from direct investors and increase of other financial liabilities) and reinvestment. Inflows classified as foreign direct investment from privatisation made up as little as LTL 0.3 million.

On 30 June 2003, accumulated foreign direct investment in Lithuania stood at LTL 14.02 billion (EUR 4.06 billion), or LTL 4,060 (EUR 1,176) per capita.

Largest foreign direct investment flows went to telecommunications (LTL 215.1 million), other financial intermediation (LTL 171.7 million), electricity, gas and water activities (LTL 163.6 million), wholesale trade and commission trade (LTL 114 million) and the production of petroleum products (LTL 75.8 million).

On 30 June 2003 the processing industry accounted for 28.8 per cent of total foreign direct investment in Lithuania, financial intermediation for 19.9 per cent, transport, storage and telecommunications for 17 per cent, wholesale and retail trade for 16.7 per cent.

The largest investors by country were Denmark (16.5% per cent of total investment), Sweden (14.9%), Estonia (12.5%), Germany (9.5%) and the USA (8.3%). EU investors accounted for 58.7 per cent of total investment, EU candidate countries for 16.9 per cent.

Portfolio investment.

Portfolio investment flows were negative in Q2 2003 (LLT 746.5 million) as the Government redeemed an earlier Eurobond issue. However, in first half 2003 portfolio investment inflows made up LTL 674.3 million. These investment inflows were determined by the distributions of a new Government Eurobond issue.

Other foreign investment.

Trade credit from non-residents increased by LTL 68.6 million during Q2 2003 and amounted to LTL 161.2 million over first half 2003. Non-resident deposit flows in domestic commercial banks made up LTL 94.1 million in Q2 2003 against LTL 150.2 million in Q1, but over the first half of the year foreign loan flows were negative (i.e. more foreign loans were repaid) and made up LTL 256.6 million.

Reserve assets.

Reserve asset flows were positive in the first half of 2003 (LTL 444.5 million). Operations with central government institutions (mostly inflows from the distribution of the Government Eurobond issue) increased reserve assets by LTL 189.8 billion. In addition, net purchase of foreign exchange by the Bank of Lithuania from commercial banks was LTL 232.5 million over the period under review due to higher demand for litas.

Errors and omissions in the Balance of Payments in first half 2003 made up LTL 344.7 million (LTL 624.3 million in first half 2002).

International investment position of the Republic of Lithuania. On 30 June 2003, total foreign financial assets of the country made up LTL 14.3 billion, and total international financial liabilities amounted to LTL 32.6 billion. The negative international investment balance made up LTL 17.6 billion. In first half 2003, total foreign assets increased by LTL 292.4 million, international financial liabilities went up by LTL 818.9 million, and the negative international investment balance increased by LTL 526.5 million. At the end of June 2003 the international financial liabilities of the country were distributed as follows: foreign direct investment (44%), other investment (38.2%), portfolio investment (17.7%) and financial derivatives (0.1%).