Price projections are reversing to favourable for consumers, says the Bank of Lithuania in a statement.
"While Lithuania's economy has been growing steadily, economic development across the economic sectors is highly variable. Following a deceleration in previous years, construction has been on the path of a strong recovery. Nevertheless, industrial growth has slowed, mainly on account of worse performance in the oil refining sector," says Ruta Rodzko, Director of the Economics and Financial Stability Service of the Bank of Lithuania.
Domestic demand, which last year took the role of the economy's major engine over from export, is likely to continue to be an important factor for GDP growth into this year – both on account of a recovery in investment and growth in personal consumption, which is driven by a recovery in employment, wage growth, and price developments favourable for consumers.
It is projected that this year demand in foreign trade partner countries will increase more than last year, especially in the European Union countries. The outlook for the economic activities related to export to Russia, especially transport, is to be estimated with greater cautiousness though. The economic development in this country has been slowing for some time already, and increasingly worse projections are presented for its economic development.
The Bank of Lithuania has substantially – by 0.6 percentage points – reduced the inflation projection for this year. Average annual inflation, after posting 1.2% last year, this year is projected to be 0.9%. Fuel prices dropped more than projected, while food and market service prices rose less than expected at the end of last year. Price developments are likely to remain favourable for consumers. Administered energy and gas prices went down already this year. Global market prices for food, energy and other commodities are projected to drop further.
Unemployment has been coming close to the natural unemployment rate, thus developments in the labour market are likely to be marginal. Employment is projected to grow less than last year and the fall in unemployment rate to be less strong. This year the unemployment rate is likely to be 10.4%, while next year, it is expected to fall below the limit of 10% and be 9.2%.
