VILNIUS — It could be the end of the worst or a further plummet for the Lithuanian economy in the third quarter, depending on who you ask.

The Lithuanian Statistics Department is due to release a report on how the troubled Baltic nation’s economy performed in the third quarter on Tuesday. Economists working for the country’s banking sector, dominated by Scandinavians, are on both sides of the fence. Some analysts predict the gross domestic product will have improved over the previous quarter’s decline of 20.2 percent, the worst in Europe. However, others are more pessimistic.

Danske Bank is predicting a whopping 25 percent decrease from last year, which would likely place Lithuania as not only the worst-performing economy in Europe but perhaps the world.

“If you look at the macroeconomics on a monthly basis … they have continued to deteriorate, that is what we are basing it on,” Lars Christensen, Danske Bank chief analyst, told Baltic Reports. “We just haven’t seen any stabilization … it’s most likely that Lithuania had the worst third quarter of all the Baltic countries.”

However Christensen cautions that because of the prevalence of black market activity in Lithuania, likely to have increased as businesses seek to avoid paying increased taxes amid tightening margins, and the sheer scope of the economic decline general statistics about the national economy should be taken with a grain of salt.

“It’s hard to tell due to the pure scale of the drop. It’s so massive the statistics become unreliable,” Christensen said. “Because of the gray economy, it’s very hard to determine.”

Christensen predicts that indicators will show the economy to have bottomed in the third quarter and that the fourth quarter will finally see better numbers.

SEB Bank, Lithuania’s largest bank by assets, is more optimistic than Christensen, arguing that the bottom was already reached in the second quarter and that the third quarter GDP will decline by only 17 percent.

“We did see some better changes in the industry for example, the retail trade also, the transport sector is doing somewhat better,” Vilija Tauraitė, senior economist at SEB, told Baltic Reports. “According to the real GDP change, we think that the economy has bottomed out in the second quarter.”

Recovery effects distant

Given the lack of internal demand, weak external demand and continued government austerity measures, Lithuania’s economy as well as the other two Baltic states are not expected to turn around until 2010 at the earliest. Whatever GDP fluctuations occur until then, the average Lithuanian will continue to face a tough job market.

“We expect to see improvements in the labor market only in the second half of 2010,” Tauraitė said. “Wages and salaries will continue dropping. The government will continue cuts in social benefits.”

Meanwhile both Tauraitė, Christensen and other analysts expect property values in Lithuania to continue to decline, especially in the commercial sector given the glut of vacancies and the over-valuation of property at the height of the “Baltic Tiger” boom.

“Yes, it’s pretty obvious that that will continue to decline. That’s actually positive, you had a huge bubble in the real estate sector,” Christensen told Baltic Reports. “Gravity does exist.”