Lithuania Can Weather Economic Downturn Without Bailout -IMF
Dowjones Business News
December 16th, 2008
VILNIUS, Lithuania (AFP)–Lithuania can weather economic strains without seeking a bailout from the IMF, a senior official from the global lender said Tuesday following talks in the Baltic state, which is forecast to experience a sharp recession in 2009.
“We don’t see any need for Lithuania to appeal for aid from the IMF,” Catriona Purfield, the head of an International Monetary Fund delegation to Vilnius, told reporters after meeting Prime Minister Andrius Kubilius.
Kubilius underscored Purfield’s remarks.
His Conservative-led coalition has insisted that its current belt-tightening drive means that Lithuania has no need to follow neighboring Latvia down the path to a bailout from the IMF, European Union and other lenders.
Lithuania is expected to fall heavily into recession next year, with output set to fall by 4.8% compared with the level in 2008, according to a finance ministry forecast.
Kubilius’ government formally took office last week after having beaten the center-left Social Democrats in October’s general election, and has set about introducing measures that it says are meant to ward off a financial crisis, including spending cuts and an increase in VAT sales tax.
Along with fellow ex-Soviet E.U. newcomers Estonia and Latvia, it has enjoyed a reputation as an economic “tiger”.
Lithuania’s growth has been powered by exports, as well as robust domestic demand which has in turn been fueled by rising wages, loans and money sent home by the 300,000 Lithuanians who have left to work abroad, mostly in the U.K. and Ireland, since E.U. expansion.
The economy grew 8.9% in 2007, after 7.8% in 2006.
But once-solid domestic demand has tailed off in the face of high inflation, tighter domestic credit rules and the global economic crisis which has dented exports.
Lithuania’s economy is expected to grow 3.5% this year before contracting 4.8% in 2009, 0.2% in 2010 and rebounding with 4.5%, according to the latest finance ministry forecasts.
Latvia and Estonia are already grappling with recession, although Estonia hasn’t asked for a bailout.
Source : Dowjones Business News