The economy has entered a broadly favourable trajectory of healthy and balanced growth, as a multi-year reform effort comes to fruition. But income convergence with Western Europe still has a long way to go.
It will take continued policy discipline and steady progress on reforms in the following areas to extend the recovery: (i) securing euro adoption with underpinning frameworks to make it a lasting success; (ii) completing public finance repair; and (iii) implementing structural reforms to secure consistently high investment. [Following sections abridged.]
Economic outlook—a broadly favourable picture
-
Economic performance in 2013 was solid.
-
Growth is projected to pick up to 3½ per cent in 2014.
-
The balance of risks around this generally favourable outlook is tilted to the downside, primarily due to global factors.
Euro adoption plans—the next logical step on Lithuania’s European integration path
-
Lithuania seems well placed for euro adoption.
-
Euro adoption would be a welcome boon for the economy.
-
But supporting policy frameworks will be essential for making EMU membership a lasting success.
Fiscal policy—finishing the consolidation, building fiscal buffers, and locking in gains
-
The repair of public finances is well advanced but not yet complete.
-
General government spending would benefit from a public expenditure review.
-
Local government finances should be better controlled.
Financial sector—overall stable with pockets of softness
-
The largely Nordic-owned banking sector is liquid and well capitalised, but supervisors need to remain vigilant.
-
Credit unions are in need of reform; efforts by the Bank of Lithuania to strengthen supervision are welcome.
-
Low credit growth could hamper growth-enhancing investment.
Structural reform—the linchpin for future income convergence
-
Structural reforms and consistently high investment will be necessary to secure income convergence in the medium term
-
Upgrading the energy and transportation infrastructure remains a high priority.
-
Reform of public enterprises should be advanced.
-
A multipronged approach is needed to tackle high structural unemployment.
Full press release
© International Monetary Fund
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article