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Saturday, January 26, 2008

Lithuania 2007 GDP and Inflation

A quick medical check up for the Lithuanian economy in 3 quick data points. Firstly Lithuania's gross domestic product surged towards the end of the year and finally hit an annual growth rate of 10 percent in 2007 when compared with the 2006, according to preliminary figures released by the economy ministry last week. Lithuanian GDP grew by 7.5 pct in 2006 compared to 2005.

The economy is set to surge by another 8.1 pct, outstripping the previous forecast of 7.4 pct, the country's central bank also said in separate figures issued on Friday. If the expansion continues uninterrupted that is. But there are reasons to think it may not continue at this pace. The first of these is the inflation rate. During 2007 Lithuanian prices rose by 8.1%, and the bank is also forecasting that Lithuanian prices will rise by 7.9 percent in 2008 when compared with 2007.

Another reason to doubt sustainability is the current account deficit. We don't have detailed figures for 2007 here yet, but the IMF are forecasting that the deficit will come in around 10% of GDP.

Plenty of detailed reasons why this wonderful party can't continue that much longer are given by Claus Vistesen in this post here.

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