GDP growth for first time since 2008

VILNIUS — First estimates of the gross domestic product figures for the second quarter show that Lithuania’s economy grew 1.1 percent year-on-year, the country’s central statistics bureau announced on Wednesday.

The figures show that the worst appears to be behind the country’s beleaguered economy, which took severe austerity measures in 2009. The same period last year saw a year-on-year GDP drop of 19.5 percent. Unemployment is still painfully high at 15 percent of the country’s working age population. Domestic demand has been particularly sluggish, but external demand is helping the manufacturing industry get back on its feet.

The second quarter GDP also grew by 6.6 percent against the first showing a fast recovery. The first half of this year still showed a GDP of 0.9 percent less than the first half of 2009, in seasonally adjusted figures however.

The government already declared their victory in the war against the crisis when the figures for the first quarter were released in April.

“I welcome the results of the economic recovery,” Prime Minister Andrius Kubilius said in a statement to the press. “This confirms that we are going in the right direction and that the Lithuanian economy is exiting the crisis. We need further effort and time to contain unemployment and budget deficit challenges.”

Is is sustainable?

Analysts are still split as to whether the recovery is sustainable. SEB Bank sees the result as quite a moderate achievement for the economy, but a step in the right direction.

“I would say its a modest result, but important in qualitative terms. It is the first GDP increase since 2008 — it shows the Lithuanian economy is going the right way,” Gitanas Nausėda, SEB Bank analyst and adviser to the bank’s president told Baltic Reports. “Its not that impressive, but given the situation in construction and real estate it is good. It will continue this year — we expect 2010’s GDP to increase with 1 percent growth. There will be faster growth in 2011.”

Though the economy is still lower than it was in 2009, Nausėda said that the economy has bottomed out already and that the year as a whole will be good.

“Last year was terrible, this year we are bottoming out and we have all chances to improve in the second half of the year. If you take the first half figures they show that there was not growth [year on year], but we believe that the third and fourth quarters will be good enough to achieve annual growth overall,” the analyst said.

Others aren’t so optimistic about the rest of 2010 for the Lithuanian economy. Danske Bank isn’t changing its pessimistic tune yet, saying in a statement to the press that the recovery is based “on export development, which is not sustainable. The uncertainty related to the Lithuanian recovery is mainly related to investments … fixed investment spending might struggle further due to the tight credit policy and weak public sector support. For the year as a whole we expect investment spending to stagnate. We do not expect a return to positive growth rates in private consumption until the end of this year either.”

“It is quite unexpected to see such positive results that were much better than our forecast and the consensus,” said Violeta Klyvienė, chief Baltic economist with Danske Bank told Bloomberg. “An improving export trend is making a very positive impact.”

Statistics Lithuania also released a revised figure for the first quarter of 2010 on Wednesday, showing no change.

Transport, industry and wholesale companies fared well over the last three months, as other countries in the EU start to pick up the pieces and increase industrial orders again.