Flash comment: Lithuania - January 30, 2012
Growth decelerated sharply at the end of 2011
- In the last quarter of 2011 economic growth was below our expectations. According to the preliminary data annual growth in the fourth quarter declined to 4.3%, whereas compared with third quarter economy contracted by 0.9% (s.w.d.a.). Nevertheless, during 2011 economy demonstrated the solid 5.8% growth.
- The weaker 4Q economic results were due to feeble industry performance. It was the main driver of growth in the previous quarters, but in the final quarter of 2011 industrial production contracted by 0.8%, compared with the same period a year ago. Furthermore, investments were probably also hurt by rapidly deteriorating confidence.
- The growth of economy was influenced by business investments and private consumption which contributed to sustainable growth of economy last year. In 4Q alone retail trade volumes (excl. motor vehicles) went up by 12.3% compared with the same period a year ago.
- This year 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. Under our main scenario, where there is some progress in euro zone debt crisis and tension in financial markets does not increase, we forecast Lithuanian economy to expand by 3.3% this year.
- Consumer confidence has increased by 7 points in January, and industrial confidence has been recovering slightly since November, indicating that economic recession is not likely.