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Tuesday 23.01.2018 | Name days: Strauta, Grieta

SEB: there is a 50% chance Lithuania will be eligible for Euro in 2015

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Dainis Gaspuitis

Dainis Gaspuitis

The Baltic States have been the most rapidly growing economies in the European Union lately, and they can retain their positions in the future as well. Economic growth in Latvia and Lithuania is expected to slow down this year. That in Estonia will remain unchanged – 3.3% respectively. Next year’s activity will grow to 3.7%, as BNN was told by SEB bank economist Dainis Gaspuitis.

“Under influence from external factors, Latvia’s growth rates will reduce to 3.5% this year. It will, however, increase to 4.8% in 2014. That of Lithuania is 3.2% and 3.5% respectively. Activity is mainly dictated by private consumption, even though export shows good results. There seems to be a pressure of expenses in Estonia, which is formed by a rapid increase of salaries. While Latvia soon expects to receive green light for Euro adoption, there is only a 50% probability of Lithuania qualifying for this in 2015. Reducing inflation in order to meet the specific level of Maastricht criteria will prove to be quite a challenge for Lithuania”, – the economist predicts.

According to him, the global economic growth rate is slowly becoming stronger. According to the outlook of the Economic Cooperation and Development Organization, the GDP of 34 countries of the world will increase by 1.3% this year and 2.3% next year. “Factors that reduce the pressure on prices remain important. Even though the official economic policy is treated to market trust, which is reflected in the low bond yields and growing stock markets, changes in fiscal and monetary policy sustain general uncertainty”, – the bank expert notes.

According to him, cyclic forces and monetary policy factors are currently on the side of global economic growth. Meanwhile, the surplus and investment level remains low. Policies of central banks continue to secure low interest rates and unlimited liquidity.

“Eurozone will remain on the side of negative economic processes. In spite of its achievements in reducing inequality, it still combats the dangerously weak growth and insufficiently capitalized banking system and credit offer, large state debt and political instability combination”, – Gaspuitis says.

The main risks that are linked to the untraditional monetary policy are related to the inability of political leaders to carry out necessary reforms and the financial market’s ability to realize an adequate price setting.

According to the economist, fundamental problems remain as well. Credit offer, especially in Southern Europe, is insufficient because of weak banks. The debt level of households and companies remains high. Apartment prices reduce. The current account improvements are largely related to the weak domestic economy. The level of unemployment will continue to rise, reaching a record level in 2014 – 12.4%. Attempts to form a political union, which is an important stabilizing factor, is progressing very slowly. The fact that the austerity policy is being overlooked creates uncertainty about the longevity of the international financial aid program.

Following a short slow-down in the nearest quarter, the economy of USA will continue to recover. In 2013, the GDP will grow by 2.0% and by 3.2% in 2014 with no signs of a growing pressure from inflation. The job market is expected to recover slowly. The budget will remain the source of political instability, even though the deficit of the federal budget is reducing faster than expected. The housing market, on the other hand, will continue to recover, Gaspuitis predicts.

From the perspective of Nordic countries, the economic situation continues to show different trends. Sweden’s recovery will continue, but slowly. The problems of Eurozone will affect export and investment growth, while households continue to spend in spite of growing unemployment. It is expected to grow to 8.2%, which is expected to be followed by careful reduction. In 2013, GDP will grow by 1.3% and by 2.5% in 2014.

Denmark’s and Finland’s economies will combat stagnation. Norway’s economy, on the other hand, is in a better state. Norway’s GDP increase will be 1.7% this year and 2.4% next year.


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