Lithuania in the 21st century Economy of Lithuania

real gdp growth in lithuania, 1996–2008



economic sentiment indicator , components



balance of payments in lithuania, quarterly data

the economy of lithuania 1 of fastest growing in world during decade until 2008. between 2000 , 2008, lithuanian gdp grew 77%.

one of important factors contributing lithuania s economic growth accession wto in 2001 , eu in 2004, allows free movement of labour, capital, , trade among eu member states. on other hand, rapid growth caused imbalances in inflation , balance of payments. current account deficit gdp ratio in 2006–2008 in double digits , reached peak in first quarter of 2008 @ threatening 18.8%. due rapid loan portfolio growth scandinavian banks provided cheap credit in lithuania. loans directly related acquisition , development of real estate constituted around half of outstanding bank loans private sector. consumption affected credit expansion well. led high inflation of goods , services, trade deficit.

the global credit crunch started in 2008 affected real estate , retail sectors. construction sector shrank 46.8% during first 3 quarters of 2009 , slump in retail trade 30%. gdp plunged 15.7% in first 9 months of 2009.

lithuania last among baltic states hit recession because gdp growth rate in 2008 still positive, followed slump of more 15% in 2009. in third quarter of 2009, compared previous quarter, gdp again grew 6.1% after five-quarters negative numbers.

a heavy shock consumers helped balance current account in 2009. net external assets of bank of lithuania @ record height of €5.5 billion. economic sentiment , confidence of business activities have rebounded record low @ beginning of year 2009.

sectors related domestic consumption , real estate still suffer economic crisis, exporters have started making profits lower levels of revenue. catalysts of growing profit margins lower raw material prices , staff expense.

euro adoption

on january 1, 2015, lithuania became 19th country adopt euro. despite concerns joining eurozone due european debt crisis , changeover costs estimated @ €600 million through 2020 (in contributions eu budget , costs commercial lenders), lithuania stands benefit euro politically , economically because lithuania has not had independent monetary policy past twenty years because of currency pegs. joining euro relieve bank of lithuania of defending value of litas, , give lithuania in decision-making of european central bank (ecb), access ecb single-resolution fund , cheaper borrowing costs .

lithuanians have marked preference using cash opposed bank cards , authorities hope diminished euro s adoption, negatively affect rather large informal economy. according ecb data, lithuanians take twice money out in cash estonians or latvians, , cash used under counter money, interest rates time deposits in commercial banks low .