Lithuania: Economy continues to growth strongly despite global economic slowdown
November 30, 2011
In the third quarter, GDP grew 6.7% over the same period last year. The result was above both the 6.5% rise recorded in the second quarter and the 6.6% increase reported in the 28 October flash estimate. The Lithuanian economy recovered strongly in the last six quarters after recording one of the largest full-year contractions in the region in 2009. In fact, the Q3 outturn was the strongest result since Q1 2008. The main driver behind the strong third quarter reading was a marked improvement from the external sector, while domestic demand moderated. Private consumption grew a strong 5.9% over the same period last year, although it was still below the 6.7% expansion seen in the second quarter. Public spending added only 0.1% (Q2: +1.7% year-on-year) due to government efforts to contain the fiscal deficit. Meanwhile, fixed investment moderated sharply to 7.9% (Q2: +20.7% yoy), which represents the slowest pace in five quarters. The external sector's net contribution to overall economic growth improved markedly due to a significant moderation in import growth, as purchases from overseas fell from an 18.4% expansion in the second quarter to a 7.5% rise in the third. On the other hand, exports of goods and services also softened and grew 8.3% (Q2: +16.5% yoy). As a result, the external sector's net contribution swung from minus 1.1 percentage points in the second quarter to plus 0.6 percentage points in the third. At the sector level the third quarter expansion was driven by a strong performance in the services sector (Q2: +5.8% yoy; Q3: +6.1% yoy), in particular in construction activity. On the other hand, industry slowed from an 11.2% expansion to a 6.4% rise in the third quarter, while agriculture rebounded to plus 6.5% (Q2: -8.9% yoy). A quarter-on-quarter analysis, however, does not corroborate the acceleration suggested in the annual reading, as the economy rose a seasonally and working-day adjusted 1.4% over the previous quarter, which is below the 1.8% increase in the second quarter. The Central Bank expects GDP to expand 6.2% this year, before moderating to 3.5% in 2012.