GDP growth will accelerate in Lithuania over the next two years thanks to improving trade conditions in the region and strong levels of invest- ment. The increase will be sustained over our longer-term outlook by growing domestic savings from which future investment can be drawn , as increasing inflation dampens levels of consumption. ...In doing so, net exports will still detract from overall GDP growth, albeit to a far lesser extent than we have projected in ----. Similarly, the current account deficit will be financed by a surplus in the financial account, manifested as strong inward flows of investment, as potential investors are attracted by the country s promising growth and trade outlook. Overall, the longer-term picture for the Lithuanian economy is also positive. ...This is in line with the trend emerging for the other Baltic states, where we expect growth to return to consistently strong levels by ----. This view is partly based on our expectations for Lithuania s pool of domestic savings to continue growing as the current account - Business Monitor International Ltd www.bmiresearch.com
...Lithuania will record a slightly larger budget deficit over our short-term outlook on the back of an increase in expenditure and stagnant revenue growth. However, much like its Baltic neighbours, the deficit will be small and manageable, financed through a small increase in public debt. ...This increase is largely due to growing public expenditure, which we expect to rise by - and - in ---- and ----, respectively. This growth marks a reversal in trend from recent years, which has seen Lithunia s budget deficit gradually narrow from -.- of GDP in ---- to just -.- in ----, owing primarily to robust revenue growth and prudent fiscal management. Despite this small increase in the deficit, we do not believe the government is erring back toward the days of unsustainable spending. ...In ----, the government reintroduced conscription, resulting in over -- of military expenditure being dedicated to compensation of personnel. Military equipment will also make up a significant portion of the ---- defence budget, -- Business Monitor International Ltd www.bmiresearch.com
...
