LITHUANIA: EXTERNAL FACTORS BOOST GROWTH…

Lithuania recorded GDP growth of 4.1 percent in the first quarter of 2000 (Lithuanian Department of Statistics, June 26). Most of the growth can be attributed to growing demand in Russia and Western Europe, and to the high price of oil.

The GDP increase was spurred by 7.8 percent growth in value added from industry (BNS, June 30). This came despite continuing poor performance at the Mazeikiai Nafta oil refinery, which dominates the economy. Over the first five months of the year, industrial output was up 1.9 percent. Excluding the oil-refining sector, it was up 6.2 percent. Growth in industrial activity is clearly being driven by exports. These were up 34 percent in the first quarter, despite the strength of the U.S. dollar against the euro–the Lithuanian litas being pegged to the dollar. Growth in exports is being driven by strong demand from EU countries and from CIS countries, particularly Russia. Exports to CIS countries, which account for 15 percent of total exports, grew 8 percent through April. Exports to the EU, 45 percent of total exports, grew by 11 percent.

Lithuania is also benefiting from the high price of oil. Fuel accounted for 23.0 percent of exports in the first quarter: The export of petroleum products nearly doubled year-on-year, and accounted for 51.5 percent of export gains on a payments basis. GDP growth was also driven by 27.2 percent growth in value added from the transport sector. A significant share of Lithuania’s transport sector is based on transit trade from Russia, so Russia’s huge increase in oil exports in the first quarter directly benefited Lithuania.

… AND CORRECT EXTERNAL IMBALANCES.