Lithuanian economy in 2012:
We expect this year
to be turbulent

Nerijus Mačiulis, Chief Economist, SWEDBANK.

In the first three quarters of 2011, the Lithuanian economy expanded by 6.4% over the same period a year ago; the expansion was driven mainly by household consumption and investments. During the same period, average quarterly growth was a solid 1.8% but probably decelerated in the last quarter of 2011, when GDP was some 6% higher than a year ago. The economy probably grew by 6.3% in 2011, in line with our forecasts.

We expect this year to be more turbulent, and prospects less sanguine. The recession looming in the euro zone will affect the Lithuanian economy not only directly, via slower growth of exports, but also indirectly, via lower household and business expectations. Although, in our main scenario, the euro zone economy contracts by only 0.3% in 2012, the risk of less orderly developments and increasing tensions is high. We have cut our growth forecast for 2012 to 3.3%, down from 4.2% and to 4.0% in 2013, down from 4.2%.

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