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Lithuania's inflation not expected to decline in near future - Moody's
Real estate news By Thomson Financial
10.09.07, 1:52 AM ET
MUMBAI (Thomson Financial) - Moody's Investors Service said distinct improvements in Lithuania's fiscal policy and structural reforms have led to a gradual reduction in government debt relative to GDP and revenues. However, in its annual report on the nation, the agency added that despite these improvements, Lithuania remains one of the weaker EU-10 members, as evidenced by lower real per capita income, lower levels of government revenues, and less foreign investment as a percentage of GDP.
While rapid economic growth has swelled wages and helped the government to balance its budget, it has also caused a gradual worsening of economic imbalances,' explained Kenneth Orchard, Moody's (nyse: MCO - news - people ) senior vice president and author of the report. The current account deficit and inflation have both increased recently, and neither is expected to decline in the near future,' he added. Orchard said the wider current account deficit has been largely financed by external borrowing from foreign banks.
However, the fact that local banks are now almost entirely foreign-owned, and that the bulk of the borrowing is from parent institutions, lessens concerns about refinancing risks, he added. Moody's also said the country's 'A2' foreign and local currency government bond ratings balance a strengthening in the country's public finances and policy framework against growing external vulnerabilities, particularly the large current account deficit and rising external debt ratios.
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