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Lithuania ’s Public Finances in 2011

Lithuania ’s Public Finances in 2011. Main Macroeconomic Indicators. Inevitable Impact of Global Crisis on Lithuania but Growth has Rebounded. Strong GDP growth during 2001–2007 drove an increase in per capita income levels towards EU average income levels – EUR 7 , 938 per annum in 200 9

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Lithuania ’s Public Finances in 2011

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  1. Lithuania’s Public Finances in 2011

  2. Main Macroeconomic Indicators

  3. Inevitable Impact of Global Crisis on Lithuania but Growth has Rebounded Strong GDP growth during 2001–2007 drove an increase in per capita income levels towards EU average income levels – EUR 7,938 per annum in 2009 According to preliminary estimates, GDP in 3Q 2010 increased by 7.3% compared to 2Q 2010 and increased by 1.1% compared to 3Q 2009 Real annual GDP growth (%) Source: Statistics Lithuania, Ministry of Finance forecasts (September 2010) 3

  4. Proactive Government Measures Lead to Improved Economic Environment Compared to other EU Sovereigns General government deficit, ESA’95 (% of GDP) General government deficit comparison, ESA ‘95 (% of GDP 2009) Source: Ministry of Finance, Convergence Programme 2009 Source: Eurostat • General government deficit was modest in 2002–2007, however recent financial turmoil pushed it above the Maastricht criteria in 2008 and 2009and it remains above that threshold • The general government deficit is on track to meet the 3% Maastricht criteria in 2012 4

  5. Inflation will be Determined by External Factors • Inflation began to accelerate rapidly in mid-2008 primarily due to an increase in gas prices • The significant reduction in the growth of the HICP in 2009 was due to the effects of the economic slowdown • In the second half of 2010 the annual average inflation met the expected Maastricht euro convergence criteria for inflation • In 2011 Inflation will be determined by external factors particularly by global energy and food prices Annual average inflation in Lithuania (HICP, %) Annual average inflation in 2010 (HICP, %) Source: Eurostat Source: Statistics Lithuania, Ministry of Finance forecasts (September 2010) 5

  6. Unemployment Expected to Fall after 2010 • After the peak in 2Q 2010, the unemployment rate decreased by 0.5% from 18.3% to 17.8% in 3Q 2010 due to the rise in activity and employment and the slight fall in unemployed persons. The unemployment rate decreased for the first time after a continuous deteriorationfor two years. • To stabilize the unemployment, the government adopted necessary legislation to liberalise the labour market, frontloaded EU financial resources and has taken action against the frictional unemployment • In 2009 average gross monthly earnings fell by 4.4% as compared to 2008 and by further 2,8% in 3Q 2010 as compared to 3Q 2009 which shows high flexibility and ability to retain competitiveness if needed. • Following the recovery of exports andan increase in the volume of workand number of working hours, in 3Q 2010 wages increased by 1.3% as compared to 2Q 2010 Source: Statistics Lithuania Unemployment rate (%) Unemployment rate, 3Q 2010 Source: Statistics Lithuania, Ministry of Finance forecasts (September 2010) Source: Eurostat, Statistics Lithuania, Latvia and Estonia 1 Activity rate – a ratio of the labour force aged 15–64 to the total population of the same age group 2 Employed people – persons aged 15 and older doing any kind of work, for which they are remunerated in cash or in kind, or have income or profit 3Less individual enterprises

  7. Exports Well Diversified and Recovering Export growth of goods and services (% Chg YoY) • EU remains the main trading partner for the Republic of Lithuania with 61.4% of total exports in Jan-Nov 2010 • EU membership has accelerated export growth since 2005 • The strong recovery of exports from the beginning of 2010 is based on the recovery in trading partners. In Jan-Nov 2010 exports of goods increased by 31,9% as compared to the same period of 2009 • The recovery of exports markets is broad based Exports of goods in Jan-Nov 2010 Source: Statistics Lithuania, Ministry of Finance forecasts (September 2010) Export growth of goods and services vs. corresponding quarter of previous year(%) Source: Statistics Lithuania Source: Statistics Lithuania

  8. 2010-2011 National Budget(State Budget and Municipal Budgets)(LTL million)

  9. 2010-2011 State Budget Revenue (LTL thous.)

  10. 2010-2011 State Budget Expenditure (LTL thous.)

  11. Government Debt Rises but to Still Moderate Levels • Positive trend supported by tight fiscal policy and strategic debt management • Conservative debt management approach • Lithuania’s General Government debt compares well to credit peers General Government debt in 2009 (% of GDP) comparison General Government debt (% of GDP) Source: Ministry of Finance,Eurostat as at 10 January2011 Source: Ministry of Finance

  12. PlannedBorrowing Requirement Financing in 2011 • Gross borrowing requirements in 2011: EUR 1,8 bn • Net borrowing requirements in 2011: EUR 1,1 bn • Net borrowing limit in 2011: EUR 1,1 bn (an additional EUR 0,5 bn limit earmarked for prefunding) Financing plan (EUR bn) Borrowing requirement breakdown (EUR bn) Total EUR 1,8 bn, of which: Total EUR 1,8 bn, of which: Domestic bills and creditlines EUR 0,5 bn Domestic debt redemptions EUR 0,7 bn Domestic bonds EUR0,5 bn Net budgeted requirements EUR 1,1bn International bonds EUR0,7 bn IFIs’ loans EUR 0,1 bn Source:Ministry of Finance, December 2010

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