Review of the Balance of Payments the Republic of Lithuania in the First Quarter of 2004
Current Account. According to preliminary data, in Q1 2004 the Balance of Payments current account deficit was negative and made up LTL 1.18 billion. Year on year, the current account deficit widened by LTL 707.3 million to make up 8.9 per cent of GDP according to preliminary estimates. The CAD for Q1 2003 made up 3.8 per cent of GDP.
CAD and CAD to GDP ratio |
||
CAD, LTL million |
CAD to GDP ratio, % |
|
2003 |
-3,854.00 |
-6.9 |
Q1 |
-476.21 |
-3.8 |
Q2 |
-1,158.06 |
-8.4 |
Q3 |
-734.76 |
-5.0 |
Q4 |
-1,484.97 |
-9.9 |
2004 |
||
Q1 |
-1,183.55 |
8.9 |
* The Balance of Payments data for 2003 have been revised.
Faster growth of the import of goods, compared to export of goods, determined a wider foreign trade deficit in Q1 2004, resulting in the increase of the CAD. Faster import growth was mostly prompted by the continuing growth of domestic demand. Higher imports were also influenced to a certain extent by a higher real effective exchange rate of the litas against the currencies of Central European countries (growth rate of import of goods from these countries was the highest). The positive balance of services declined over the reporting period, while the negative income balance increased. These changes were partly offset by the higher positive balance of current transfers.
Development of the current account balance and composite balances. Contributions to the current account changes |
||||
Q1 2004 LTL million |
Q1 2003 LTL million |
Change, % |
Contributions, % |
|
Capital account balance |
-1,183.55 |
-476.21 |
148.5 |
148.5 |
Trade balance |
-1,184.76 |
-516.8 |
129.2 |
140.3 |
Balance of services |
419.49 |
491.56 |
-14.7 |
15.1 |
Income balance |
-595.92 |
-571.97 |
4.2 |
5.0 |
Balance of current transfers |
177.64 |
121.0 |
46.8 |
-11.9 |
Foreign trade. According to the preliminary data of the Department of Statistics under the Government of the Republic of Lithuania, in Q1 2003 export of Lithuanian goods increased by 8.5 per cent, while import went up by 11.3 per cent year on year. Such developments were mostly determined by the increased exports of intermediate and capital goods and imports of intermediate goods.
Changes of export and import of main groups of goods and contributions Q1 2004, year on year, % |
||||
Export |
Import |
|||
Change |
Contributions |
Change |
Contributions |
|
Total goods |
8.5 |
8.5 |
11.3 |
11.3 |
Capital goods |
4.4 |
0.4 |
31.1 |
4.7 |
Intermediate goods |
7.0 |
3.7 |
4.7 |
2.9 |
Consumption goods |
11.4 |
3.0 |
19.8 |
3.3 |
Motor spirit |
30.5 |
2.1 |
31.0 |
0.0 |
Passenger motor cars |
-19.6 |
-0.8 |
6.7 |
0.4 |
Other goods |
84.1 |
0.1 |
0.4 |
0.0 |
In Q1 2004 the export structure of the key groups of goods changed only slightly. Similar to previous years, mineral products predominated among the exports of goods, accounting for nearly one quarter of total exports of goods. Exports of textiles and textile articles made up 13.7 per cent, machinery and mechanical appliances 12.6 per cent, and vehicles 10.6 per cent.
The lower import of mineral products accounted for 19.2 per cent of total import of goods in Q1 2004 (24.1 % in Q1 2003). Import of machinery and mechanical appliances and vehicles went up and accounted for 18.3 per cent and 17 per cent, respectively.
Excluding petroleum products, export of goods grew by 8.7 per cent and import of goods went up by 18.5 per cent in Q1 2004.
Export of Lithuanian goods to the current EU (25 Member States) increased over the reporting period by 9.3 per cent, while import of goods (by the country of consignment) grew by 15.9 per cent. Export of Lithuanian goods to the current EU accounted for 59.6 per cent of total export, while import made up 63.0 per cent of total import. Export of goods to the CIS and import from the CIS declined and accounted for 14.8 per cent and 27.5 per cent of total export and import, respectively.
Contributions to changes in export of goods by country unions (by export flows of goods) Q1 2004, year on year, % |
|||||||||||
Total |
EU |
CEFTA |
EFTA |
CIS |
Other countries |
Russia |
Germany |
Latvia |
Estonia |
USA |
|
Contribution to export by country |
8.5 |
5.9 |
0.6 |
2.3 |
0.6 |
-1.0 |
-1.3 |
1.0 |
-0.1 |
-0.9 |
-0.5 |
Total export |
8.5 |
14.9 |
12.1 |
12.6 |
4.2 |
-4.7 |
-12.7 |
10.3 |
-0.7 |
-19.6 |
-17.0 |
Live animals; animal products |
0.1 |
1.5 |
1.5 |
0.0 |
0.7 |
-3.3 |
1.3 |
0.5 |
-0.1 |
1.6 |
-19.8 |
Vegetable products |
1.4 |
0.1 |
0.6 |
-0.1 |
7.9 |
0.7 |
1.1 |
1.9 |
1.0 |
0.4 |
-0.4 |
Prepared foodstuffs, beverages and vinegar; tobacco |
-0.1 |
0.3 |
0.6 |
-0.1 |
-2.6 |
1.0 |
-4.8 |
0.4 |
2.0 |
0.3 |
0.2 |
Mineral products |
2.0 |
-0.2 |
1.2 |
16.1 |
-0.8 |
-4.1 |
2.4 |
0.1 |
-8.8 |
-2.0 |
-0.1 |
Products of the chemical and allied industries |
0.4 |
-0.1 |
3.3 |
0.0 |
0.3 |
1.1 |
-0.2 |
-1.0 |
2.3 |
1.3 |
-1.9 |
Plastics and articles thereof; rubber and articles thereof |
0.2 |
0.7 |
-0.2 |
0.0 |
-0.5 |
0.3 |
0.0 |
1.7 |
0.6 |
1.0 |
-0.2 |
Wood and articles of wood |
0.0 |
0.7 |
-0.6 |
-0.4 |
-0.2 |
-0.6 |
-0.5 |
0.2 |
0.4 |
-0.3 |
-1.5 |
Textiles and textile articles |
-0.2 |
-0.8 |
1.4 |
0.0 |
0.6 |
-0.1 |
0.1 |
-2.4 |
0.0 |
0.4 |
-3.3 |
Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television and sound recorders and reproducers, and parts and accessories of such articles |
3.3 |
4.5 |
3.4 |
0.3 |
4.1 |
3.3 |
2.2 |
5.3 |
3.1 |
2.3 |
1.2 |
Vehicles, aircraft, vessels and associated transport equipment |
-0.7 |
5.7 |
3.0 |
-4.9 |
-5.6 |
-6.5 |
-13.7 |
2.8 |
-2.3 |
-26.6 |
1.1 |
Other goods |
2.0 |
2.6 |
-2.2 |
1.8 |
0.2 |
3.4 |
-0.5 |
0.8 |
1.1 |
1.9 |
7.7 |
Contributions to changes in import of goods by country unions (by import flows of goods and the country of consignment) Q1 2004, year on year, % |
|||||||||||
Total |
EU |
CEFTA |
EFTA |
CIS |
Other countries |
Russia |
Germany |
Latvia |
Estonia |
USA |
|
Contribution to import by country |
11.3 |
7.4 |
2.2 |
0.5 |
0.3 |
0.9 |
-2.2 |
1.9 |
0.3 |
-0.2 |
0.2 |
Total import |
11.3 |
16.7 |
25.4 |
24.6 |
0.9 |
6.6 |
-8.7 |
11.5 |
7.0 |
-4.5 |
13.3 |
Live animals; animal products |
0.6 |
0.0 |
1.7 |
3.7 |
0.3 |
1.9 |
0.2 |
0.4 |
-0.3 |
1.8 |
6.0 |
Vegetable products |
0.2 |
-0.2 |
-0.8 |
-0.1 |
0.0 |
2.7 |
-0.2 |
0.1 |
-0.8 |
0.6 |
0.5 |
Prepared foodstuffs, beverages and vinegar; tobacco |
0.1 |
0.2 |
0.6 |
-3.1 |
0.3 |
-0.4 |
0.2 |
0.2 |
5.8 |
-3.2 |
-2.0 |
Mineral products |
-2.7 |
0.0 |
0.1 |
0.5 |
-8.8 |
-0.5 |
-16.6 |
0.1 |
-4.2 |
0.2 |
-0.3 |
Products of the chemical and allied industries |
2.2 |
1.4 |
6.5 |
-1.4 |
2.8 |
0.9 |
2.5 |
3.9 |
0.0 |
1.0 |
-0.9 |
Plastics and articles thereof; rubber and articles thereof |
1.6 |
2.0 |
2.7 |
0.2 |
0.3 |
2.2 |
0.2 |
1.1 |
0.8 |
0.3 |
10.8 |
Wood and articles of wood |
0.5 |
0.3 |
1.3 |
0.1 |
0.9 |
-0.3 |
0.4 |
0.5 |
-0.7 |
-0.1 |
-0.1 |
Textiles and textile articles |
0.5 |
-0.5 |
1.1 |
2.2 |
0.3 |
3.5 |
0.0 |
-0.3 |
0.7 |
1.3 |
-2.0 |
Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television and sound recorders and reproducers, and parts and accessories of such articles |
3.4 |
6.3 |
3.7 |
-3.1 |
0.2 |
2.3 |
0.4 |
5.6 |
2.1 |
9.0 |
-8.7 |
Vehicles, aircraft, vessels and associated transport equipment |
3.1 |
3.7 |
2.4 |
26.9 |
3.9 |
-3.4 |
3.1 |
0.1 |
-0.8 |
-22.3 |
22.9 |
Other goods |
1.8 |
3.4 |
6.1 |
-1.5 |
0.6 |
-2.5 |
1.2 |
-0.1 |
4.4 |
6.8 |
-12.9 |
Services
. During Q1 2004 exports of services increased by 10 per cent year on year, while import of services grew by 25 per cent. The total positive balance of services amounted to LTL 419.5 million (LTL 491.6 million in Q1 2003).
The fastest growth (50% to several times) was recorded in the export of construction, financial, computer, legal, accounting and auditing services. However, these services accounted for a minor share of the total export of services. Transport and travel services continued to dominate in the services structure. Transport and travel services accounted for 57 and 28.8 per cent of the total export of services, respectively, and 43.1 per cent and 36.6 per cent of import, respectively.
During Q1 2004 exports of services increased by 13.3 per cent year on year, while import of services grew by 39.7 per cent.
Year on year, the number of foreigners visiting Lithuania declined by 4.9 per cent in Q1 2004, while the number of Lithuanian residents travelling abroad went up by 5.5 per cent. The number of EU residents visiting Lithuania increased by nearly 14 thousand (38%) over the reporting period, while the number of CIS visitors declined by 52.9 thousand (16.9%), of which the number of those coming from Russia went down by 49 thousand (24.1%). Because of these changes the positive travel balance declined by LTL 5.4 million to LTL 42.1 million (LTL 47.5 million in Q1 2003).
Compared to the total export of services, export to the current EU (25 Member States) made up 44.9 per cent, and to the CIS 41 per cent. Compared to total export of transport services, export of these services to the CIS accounted for 51.2 per cent and to the EU for 43.6 per cent. Export of travel services to the EU stood at 39.3 per cent, and other services at 61.3 per cent.
Income. The income balance deficit made up LTL 595.9 million in Q1 2004. Year on year the negative income balance increased by LTL 24 million, i.e. 4.2 per cent. Over the reporting period, the income of Lithuanian economic agents from investment abroad went down by 18 per cent, while income of non-residents from their investment in Lithuania increased by 4.9 per cent (LTL 36.5 million). Dividends to non-residents (on foreign direct investment) went up by LTL 12.8 million, and non-resident 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) grew by LTL 6.4 million. Interest on holdings of Lithuanian debt securities by non-residents increased by LTL 53.1 million.
Current transfers. The balance of current transfers was positive in Q1 2004 and stood at LTL 177.6 million (LTL 121 million in Q1 2003). The highest increase in Q1 2004 was recorded in cash transfers of private individuals (LTL 46.2 million).
Capital and financial account.
The positive capital and financial account balance made up LTL 1.07 billion in Q1 2004. Excluding official reserve assets, the total investment flows abroad made up LTL 1.13 billion, and foreign investment flows in Lithuania stood at LTL 2.32 billion. The current account deficit was mostly financed by net portfolio investment inflows which made up 109.4 per cent of the CAD. Net foreign direct investment inflows accounted for 49.0 per cent of the CAD, while net flows of other investment and financial derivatives were negative (LTL -683.5 million).
Investment abroad. Investment abroad by Lithuanian economic entities made up LTL 961.6 million in Q1 2004. Changes in Government and commercial bank deposits and balances in correspondent accounts with foreign banks accounted for the largest part of these flows. In addition, commercial bank investment in non-resident debt securities amounted to LTL 128.5 million. Foreign investment by other domestic economic entities made up LTL 78.2 million.
Foreign investment in Lithuania. During Q1 2004 foreign investment flows increased by LTL 639.9 million year on year. These changes in foreign investment flows were determined by increased foreign loans and foreign direct investment in Lithuania.
Changes of the capital and financial account and composite balances, including contributions to changes of the account |
||||
Q1 2004 LTL million |
Q1 2003 LTL million |
Change, % |
Contributions, % |
|
Capital and financial account balance (with errors and omissions) |
1,183.55 |
476.21 |
148.5 |
148.5 |
Capital account balance |
16.76 |
16.10 |
4.1 |
0.1 |
Direct investment |
580.29 |
490.09 |
18.4 |
18.9 |
Portfolio investment |
1,294.52 |
1,524.68 |
-15.1 |
-48.3 |
Financial derivatives |
-21.01 |
-45.96 |
-54.3 |
5.2 |
Other investment |
662.52 |
18.36 |
-3708.5 |
-143.0 |
Reserve assets |
-141.37 |
-1,338.58 |
-89.4 |
251.4 |
Errors and omissions |
116.88 |
-188.48 |
-162.0 |
64.2 |
Foreign direct investment
flows were LTL 643.3 million in Q1 2004 in Lithuania. Year on year foreign direct investment flows increased by LTL 121.5 million. Foreign direct equity investment made up LTL 103 million, other capital flows amounted to LTL 329 million and reinvestment to LTL 211.3 million. Inflows classified as foreign direct investment from privatisation made up LTL 101 million over the reporting period.
On 31 March 2004, accumulated foreign direct investment in Lithuania stood at LTL 14.2 billion (EUR 4.12 billion), or LTL 4,130 (EUR 1,196) per capita.
In Q1 2004 most foreign direct investment was directed into electricity, gas and water supply activity (LTL 273.1 million), telecommunications (LTL 153.8 million), wholesale and retail trade (LTL 85.3 million) and financial intermediation (LTL 56.5 million).
On 31 March 2004 the manufacturing industry accounted for 29.8 per cent of total foreign direct investment in Lithuania, transport, storage and telecommunications for 17.6 per cent, retail and wholesale trade for 17.3 per cent, and financial intermediation for 15.6 per cent.
The largest investors by country were Denmark (16.6% per cent of total investment), Sweden (15.4%), Germany (9.6%), the USA (8.6%), Estonia (8.5%) and Finland (8.4%). Investment from the current EU (25 Member States) accounted for 75.1 per cent of total investment, of which investment of old EU Member States (15 countries) accounted for 61.8 per cent.
Portfolio investment. Portfolio investment flows in Q1 2004 made up LTL 1.43 billion, where operations with debt securities were predominant (LTL 1.4 billion). Similar to the previous years, the major participant of the foreign portfolio investment market was the Government which distributed a new Eurobond issue in March.
Other foreign investment.
Other investment flows were LTL 299.1 million in Lithuania. Year on year these investment flows increased by LTL 507.1 million. Loans received by commercial banks (LTL 158 million) and non-resident deposit flows in domestic commercial banks (LTL 168.9 million) accounted for the largest share of these flows. Foreign loans received by other sectors made up LTL 148.8 million. The flows of loans received on behalf of the state were negative (more foreign loans were repaid) at LTL -90.4 million. Trade credit from non-residents was negative (LTL -68.4 million), i.e. it went down.
Net foreign loan flows in Q1 2004* LTL million |
||||||||
Abroad (loans to non-residents) |
In Lithuania (received from non-residents) |
|||||||
Total |
Of which: |
Total |
Of which: |
|||||
EU (25) |
Euro area |
Other countries |
EU (25) |
Euro area |
Other countries |
|||
Total |
-53.90 |
26.03 |
65.37 |
-79.93 |
216.51 |
100.58 |
2.72 |
115.93 |
of which: |
||||||||
Central government |
- |
- |
- |
- |
-90.36 |
-78.15 |
-73.28 |
-12.21 |
Monetary financial institutions |
-35.64 |
41.61 |
65.16 |
-77.25 |
158.03 |
98.87 |
66.02 |
59.16 |
Other sectors |
-18.26 |
-15.58 |
0.21 |
-2.68 |
148.84 |
79.86 |
9.98 |
68.98 |
* Net loan flows are loans received (granted) over the reporting period less repaid loans.
Reserve assets. International reserve flows in Q1 2004 were positive (LTL 141.4 million). Such developments were determined by Bank of Lithuania and central government institution operations which increased reserve assets by LTL 426.5 million, higher commercial bank required reserves in foreign exchange (LTL 81.6 million) and net inflows of the Bank of Lithuania from investment in foreign currencies. A factor reducing reserve assets was the net sale of foreign exchange to commercial banks of LTL 374.3 million.
Balance of international investment position of the Republic of Lithuania. On 31 March 2004, total foreign financial assets of the country made up LTL 17.2 billion, and total international financial liabilities amounted to LTL 37 billion. The negative international investment balance made up LTL 19.8 billion. In Q1 2004 total foreign assets increased by LTL 1.41 billion, international financial liabilities went up by LTL 2.27 billion, and the negative international investment balance increased by LTL 860.4 million. At the end of March 2004 the breakdown of international financial liabilities of the country was as follows: other investment 41.9 per cent, foreign direct investment 38.4 per cent and portfolio investment 19.7 per cent.