Lithuania: Exports trigger cyclical downturn

In Lithuania, the slowdown of growth in exports and corporate investments that could be observed towards the end of 2011 will continue throughout 2012. In spite of parliamentary elections to be held in October 2012, the government reinforced austerity measures in order to reduce the budget deficit to below 4% of GDP. This will curb domestic demand throughout the year. Thus, the situation on the labour market will remain strained and outward migration especially of young people will continue. A revival of GDP growth to be expected in 2013 and 2014 should be backed by an external demand stimulus.