Lithuania Country Risk Report Q4 2017
Core Views
The Lithuanian economy will post robust growth over our short-termoutlook to 2019, buoyed by a strong consumer sector and improvinginvestment climate. Rising inflation will add some headwinds afterthe economy posted strong Q117 headline growth, but won't suppressa notable acceleration in real GDP growth over the comingtwo years.
Tensions neighbouring Russia will continue to pose the largest threatto investor interests in Lithuania over the coming months. While wedo not expect an outright conflict between the two states, the threatof Russian military intervention will keep defence spending a keypriority of Lithuania's fiscal policy and encourage closer relationswith the rest of the EU.
Major Forecast Changes
We have revised up our forecasts for real GDP growth in 2017, from2.8% to 3.5% on the back of stronger-than-expected Q1 data.
- Executive Summary
- Core Views
- Key Risks
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Rampant Consumer Will Drive Acceleration In Growth
- The Lithuanian economy will post robust growth over our short-term outlook to 2019, buoyed by a strong consumer sector and
- improving investment climate. Rising inflation will add some headwinds after the economy posted strong Q117 headline growth, but will
- not suppress a notable acceleration in real GDP growth over the coming two years.
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Outlook On External Position
- TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
- TABLE: TOP 5 GOODS IMPORTS IN 2015
- TABLE: TOP 5 GOODS EXPORTS IN 2015
- TABLE: CURRENT ACCOUNT BALANCE FORECASTS
- Monetary Policy
- Improving Growth To Bring ECB Closer To A Gradual Exit
- Economic and financial conditions in the eurozone have normalised over the past two-and-a-half years since the ECB announced the
- launch of its expanded asset purchase programme in January 2015, and now it is clear that monetary policy has hit an inflexion point.
- The withdrawal of monetary accommodation is set to be gradual and cautious, however.
- Structural Fiscal Position
- TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- Currency Forecast
- EUR: Real Rate Differentials Do Not Support A Bull Market
- The euro is rapidly approaching key resistance at USD1.15/EUR and despite the growing upside momentum we remain neutral from
- a short-term perspective as the recent rally is not justified by the still-wide real yield spread between the US and Germany. From a
- longer-term perspective, while the euro is slightly undervalued, the real yield differential is likely to remain strongly in favour of the dollar,
- suggesting the euro will continue to edge weaker.
- TABLE: BMI EUROZONE CURRENCY FORECAST
- Chapter 2: 10-Year Forecast
- The Lithuanian Economy To 2026
- Structurally Lower Growth But Outlook Remains Stable
- Unfavourable demographics, a low savings rate and declining global trade volumes will see real GDP growth trend lower in Lithuania
- over the coming decade. However, low debt levels and an attractive operating environment will help sustain investment growth,
- maintaining low but stable economic activity throughout our long-term forecast period.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Contents
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Foreign Policy Status Quo Going Nowhere
- Tensions with neighbouring Russia will continue to pose the largest threat to investor interests in Lithuania over the coming months.
- While we do not expect an outright conflict between the two states, the threat of Russian military intervention will keep defence spending
- a key priority of Lithuania's fiscal policy and encourage closer relations with the rest of the EU.
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Policy Will Struggle To Navigate Key Challenges
- Most of Lithuania's main political parties enjoy a degree of consensus on the country's main issues, but future governments will struggle
- to navigate policy around an increasingly nationalist electorate, an uncertain future for the EU and tense relations with neighbouring
- Russia.
- Chapter 4: Operational Risk
- Operational Risk
- TABLE: DEVELOPED STATES – LABOUR MARKET RISK INDEX
- TABLE: DEVELOPED STATES – LOGISTICS RISK INDEX
- TABLE: DEVELOPED STATES – CRIME AND SECURITY RISK INDEX
- TABLE: DEVELOPED STATES – TRADE AND INVESTMENT RISK INDEX
- Chapter 5: BMI Global Macro Outlook
- Global Growth Solidifying, But 'Reflation' To Moderate
- TABLE: GLOBAL MACROECONOMIC FORECASTS
- TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
- TABLE: LITHUANIA – MACROECONOMIC DATA AND FORECASTS
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