NCPA - National Center for Policy Analysis

Lithuania's Economic Rebound

August 4, 2003

Lithuania has the fastest-growing economy in Europe. Last year the southernmost of the three small Baltic states had the highest growth rate in Europe, plus booming exports, zero inflation, a rock-steady currency, shrinking unemployment and a budget surplus.

  • Lithuania romped home last year as Europe's top-performing economy with real growth in Gross Domestic Product (GDP) of 6.7 percent.
  • In the first quarter of this year it did even better, its economy swelling by 9.4 percent, year-on-year.
  • The International Monetary Fund thinks Lithuania will manage to grow this year by about 6 percent and the same again next year.
  • It stepped up privatizations to raise quick cash, improved tax collection, and cut general government spending from 38 percent of GDP in 1999 to 32 percent in 2002.
  • All this brought the budget deficit down from 8.5 percent of GDP in 1999 to just 1.2 percent last year -- while this year's first quarter yielded a modest surplus.

Growth rebounded quickly. So did foreign investment, including a vital deal last year giving a Russian oil producer, Yukos, control of the Mazeikiu oil refinery, Lithuania's biggest export earner.

For all its dynamism, Lithuania and its two Baltic neighbors (Latvia and Estonia) still rank among the poorest of the 10 countries due to join the European Union next year, with per capita incomes around one-fifth the EU average. But with growth across the Union's current 15 countries averaging just 1 percent last year, the Baltic tigers are catching up.

Source: "Baltic tiger," Economist, July 17, 2003.

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