Recession worsening in Lithuania as GDP plunges

Jul 28, 2009, 9:29 GMT

Vilnius - Official statistics released Tuesday in Lithuania showed a worsening outlook for the Baltic state with both Gross Domestic Product (GDP) and retail sales down sharply.

Preliminary second quarter figures from Statistics Lithuania showed GDP contracted by a staggering 22.4 per cent year-on-year with the seasonally-adjusted figure even worse at 22.6 per cent.

Compared with the first quarter of 2009, GDP declined 12.3 per cent.

GDP per capita totalled 6,740 litas (2,786 dollars) at current prices in April-June, down more than 22 per cent on last year.

It was a similar picture in Lithuania's formerly booming retail sector. Figures for the first half of the year showed sales down by 28.8 per cent on the same period of 2008.

'We did not expect such a huge decline in GDP,' Danske Bank's Baltic analyst Violeta Klyviene told the German Press Agency dpa.

'The results for the first half of 2009 were well below our base scenario so there is a high probability the economy will contract by up to 20 per cent. The situation is still worsening in Lithuania,' she said.

Like neighbouring Latvia, Lithuania is experiencing one of the EU's deepest recessions after a decade long boom fuelled by cheap credit and an inflated real estate market collapsed.

The ruling four-party coalition government of Andrius Kubilius has introduced tough austerity measures including wage cuts and tax hikes in a bid to restore Lithuania's competitiveness.