Milda Aleknonytė | The Lithuania Tribune
The Lithuanian Ministry of Finance reduced their economic growth forecast for 2013 from 3.7% down to 3%. Yet economists are divided when it comes to forecasting the next financial crisis.
Vilija Tauraitė, senior analyst at SEB bank, told Delfi that „With such an economic growth rate Lithuania would claim to be among the fastest growing economies in the EU again.“ As the analyst pointed out, the prognosis of the Ministry of Finance is based on the assumption that the European Union will control the Euro zone stability risk. Therefore, Lithuania‘s greatest financial risks are external and largely depend on the coming events in the EU.
The Organization for Economic Cooperation and Development published a report stating an economic slowdown in the coming months in China, Italy, India and Russia. Meanwhile the report predicts a weak growth in the two biggest economies of the troubled euro zone: Germany and France.
On the other hand, Nerijus Mačiulis, senior analyst at Swedbank, thinks the Lithuanian economic growth forecast of the Lithuanian Ministry of Finance is very conservative. While Mr. Mačiulis agrees that in the first quarter of this year, Lithuanian households were keener on saving than spending, he finds that the tendencies of the labor market are too pessimistic. “In the second quarter of this year, 72.7 percent of the working-age population participated in the labor market – had a job or were looking for one. This is the highest level since the regain of independence and significantly higher than last decade’s average” the senior analyst stated Delfi. Moreover, according to Sodra, 47.8 thousand new jobs were created in the first 7 months of this year. Because the Ministry of Finance predicts that the unemployment rate in 2013 will be 12.8 percent. As Mr Mačiulis put it: “This means, that it is expected that virtually no new jobs will be created [in 2013]. I can imagine such a scenario if the crisis in the euro zone would deepen, yet the decisions of the European Central Bank last week show that such a risk is decreasing.”
Last week the European Central Bank announced that it is prepared to make unlimited bond purchases to help those euro zone countries that are in need, providing the countries meet certain conditions, including the implementation of budget cuts and economic reforms. Moreover, the German Constitutional Court approved the creation of a permanent bailout fund for the euro this Wednesday. As the court president, Andreas Voßkuhle announced, the fund is currently limited to 190 billion Euros, further payments will only be possible with the consent of the Bundestag. Even more, the recent elections in the Netherlands did not increase the represented percentage of euro-skeptics to the extent that many had predicted.
As Nicholas Spiro from Spiro Sovereign Strategy told The New York Times, “While there are grounds for more optimism since the ECB announced the details of its bond-buying program, it is far too premature to claim that the euro zone crisis has been stemmed once and for all. There are many pieces, in particular very contentious political ones, which need to fall into place over the next few weeks.”
Two things should be clear: firstly, it would be naive to think a second crisis would affect numerous economies, but would avoid Lithuania. Secondly, a wise economist will tell you that there will always be another financial crisis. The question is not if, but when and what we will call it: 12 months, 3 years or 20 years; euro crisis, global financial crisis or the Great Depression.
