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Tuesday, February 12, 2008

Lithuania Current Account Deficit December 2007

Lithuania's current-account deficit narrowed by 38 percent in December when compared with November, but before we get too excited about this we need to examine what may be driving this improvement. Clearly exports continue to expand, and grew by 4.7% over November, but the change in the trade deficit - which is what really lies behind this data - was produced by a sharp drop in imports - 7.1% month on month - which was really a result of a movement back from the very high levels registered in November.

In fact imports increased to million LTL in November - up from million LTL in October - and then fell back again to million LTL in December. Thus a large part of the change was due to this movement in imports, although it is also the case that exports accelerated in December, as can be seen in the above chart.The effect of the correction in imports on the trade deficit can be seen in the chart below.

The current account deficit, which measures the difference between money flowing into and out of the country, narrowed to 254.5 million euros ($370 million) from 408.9 million euros in November, according to the central bank today.

But there is some slight longer term improvement taking place, since the gap narrowed in the fourth quarter to 11.3 percent of gross domestic product, compared with 12.3 percent in the third quarter, the bank said. The full-year deficit was 13.2 percent of GDP in 2007, compared with 10.8 percent in the previous year.

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