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Lithuania Country Risk Report Q4 2016

  • July 2016
  • -
  • Business Monitor International
  • -
  • 45 pages

Core Views

As with several other states in Central and Eastern Europe, theLithuanian economy's small and open nature leaves it exposed tothe potential fallout of the UK's break with the European Union (EU),as investor sentiment across the eurozone deteriorates. While wehave made downward revisions to our outlook for economic growthover the next two years, we believe macroeconomic fundamentalsare well-placed to prevent a significant slowdown.While the United Kingdom's decision to leave the EU has beena boon for eurosceptics across the region, continued tensionswith Russia will mean Lithuania's own membership will be viewedpositively by the population. Relations with Russia will dominate thediscourse in the approach to parliamentary elections scheduled forOctober 2016.

Table Of Contents

Lithuania Country Risk Report Q4 2016
Executive Summary. 5
Core Views5
Key Risks..5
Chapter 1: Economic Outlook 7
SWOT Analysis.. 7
BMI Economic Risk Index 7
Economic Growth Outlook. 8
Investor Confidence Will .8
Drag On Growth Following Brexit..8
As with several other states in Central and Eastern Europe, the Lithuanian economy's small and open nature leaves it exposed to the
potential fallout of the UK's break with the European Union, as investor sentiment across the eurozone deteriorates. While we have
made downward revisions to our outlook for economic growth over the next two years, we believe macroeconomic fundamentals are
well-placed to prevent a significant slowdown.
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS.9
TABLE: PRIVATE CONSUMPTION FORECASTS.9
TABLE: GOVERNMENT CONSUMPTION FORECASTS..9
Fiscal Policy And
Public Debt Outlook. 10
Government Prudence
Sees Fiscal Stability Continue10
Strong economic growth and prudent fiscal policy will ensure a
stable position in terms of government revenues and expenditure over our long-term outlook for Lithuania. However, an increasing
dependency ratio will also force the government to increase levels of
recurrent spending.
TABLE: FIXED INVESTMENT FORECASTS.10
TABLE: NET EXPORTS FORECASTS..10
TABLE: MAIN REVENUE and EXPENDITURE CATEGORIES.11
TABLE: FISCAL AND PUBLIC DEBT FORECASTS..11
External Trade And
Investment Outlook.. 12
Deleveraging Will Improve
Economic Stability Over Long Term..12
Lithuania's external position will continue to pose a threat to economic stability over our long-term outlook due to a high external debt
burden. However, membership of the eurozone and the increasing weight of foreign direct investment in claims against the Baltic
economy limits the scope for balance of payments crises in the event of a rapid deterioration in investor sentiment. 12
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE..12
TABLE: TOP 5 GOODS IMPORTS IN 201512
TABLE: TOP 5 GOODS EXPORTS IN 2015..13
TABLE: CURRENT ACCOUNT BALANCE FORECASTS13
Regional Monetary Policy. 14
TABLE: NEGATIVE INTEREST RATES - SUMMARY..17
Chapter 2: 10-Year Forecast. 21
The Lithuanian Economy To 2025.. 21
Moderate But Stable Growth Ahead..21
Although the outlook for the Lithuanian economy over the coming decade is certainly less than inspiring compared to average real GDP
growth of 7.2% between 2004-2007, we nonetheless maintain a positive view for the economy over the long term.
TABLEL LONG-TERM MACROECONOMIC FORECASTS21
Chapter 3: Political Outlook. 23
SWOT Analysis 23
BMI Political Risk Index. 23
Domestic Politics . 24
Security Concerns
Will Offset Brexit Impact24
While the United Kingdom's decision to leave the European Union has been a boon for eurosceptics across the region, continued
tensions with Russia will mean Lithuania's own membership will be viewed positively by the population. Relations with Russia will
dominate the discourse in the approach to parliamentary elections scheduled for
October 2016.
TABLE: POLITICAL OVERVIEW..24
Long-Term Political Outlook.. 25
Convergence By No Means Assured.25
Dealing with an economy which is set to post significantly lower trend growth over the long term (compared to pre-crisis levels), while
balancing the need to pursue a more pragmatic foreign policy with Russia and the demands of an increasingly nationalist electorate, will
pose significant challenges for Lithuanian governments to 2025.
Chapter 4: Operational Risk. 29
SWOT Analysis 29
Operational Risk Index.. 29
Operational Risk. 30
Labour Market Risk..30
TABLE: DEVELOPED STATES - LABOUR MARKET RISK..30
Logistics Risk..33
TABLE: DEVELOPED STATES - LOGISTICS RISK.34
Crime And Security Risk..36
TABLE: DEVELOPED STATES - CRIME AND SECURITY RISK..37
Trade And Investment Risk.38
TABLE: DEVELOPED STATES - TRADE AND INVESTMENT RISK39
Chapter 5:BMI Global Macro Outlook. 41
Global Macro Outlook. 41
Brexit Risk Casts A Long Shadow..41
TABLE: GLOBAL ASSUMPTIONS..41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %..43
MACROECONOMIC FORECAST.45
TABLE: MACROECONOMIC DATA and FORECASTS.45

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