The Bank of Lithuania’s forecast: healthy economic development, moderate inflation
According to the most recent Bank of Lithuania’s forecasts, real GDP growth will be slightly below the forecasts, yet the development will remain sustainable. A price shock is not expected–inflation will remain moderate.
GDP is expected to grow by 3.1 per cent next year, up from 3.0 per cent this year (in August this year, the forecasts were 3.0% and 3.4% respectively).
“Economic development in many of Lithuania’s foreign trade partners has weakened and is weaker than expected. This is directly related to weaker global economic growth. As a matter of fact, this year’s outlook for the real sector in Lithuania has not worsened, as it is positively affected by one-off factors–more abundant harvests and a strong pick-up in industry. But due to lower external demand the outlook for the real sector is now somewhat worse than previously forecasted,” comments a Deputy Chairman of the Board of the Bank of Lithuania, Raimondas Kuodis.
In the opinion of Bank of Lithuania economists, investment growth is likely to be moderate: in 2012, investment growth is projected to increase by 2.3% and in 2013 by 6.2%–slightly below its average growth since the beginning of data collection.
“Uncertainty surrounding the future hampers consumption and forces businesses to postpone development solutions; as a result, the outlook for consumption and investment now seems worse than previously forecasted,” said the Director of the Economics and Financial Stability Service of the Bank of Lithuania, Rūta Rodzko.
Worsened expectations of businesses are likely not only to affect the investment solutions of businesses, but recruitment related solutions as well.
“The labour market has been recovering–employment has been rising significantly and unemployment has been declining gradually. Those employed part-time have been increasing in number most. On the one hand, this suggests that businesses use flexible forms of work, which is welcomed. However, at the same time this suggests a cautious attitude of businesses to development and related long-term liabilities to employees,” said Rūta Rodzko.
On account of stronger increases in food, fuels and industrial goods prices, in 2012 inflation is expected to be higher than previously projected and its change is likely to be minor. In 2012 inflation is likely to be 3.8 per cent and in 2013–2.8 per cent.