Lithuania‘s Year 2012 Budget Deficit Set Below 3 per cent GDP

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Systemic changes and public finance consolidation is to be complemented by substantially increased returns from State-Owned entities (SOE’s) in Year 2012 and behind. All this provide with the solid setting for year 2012 fiscal deficit target of 2.8 percent GDP – half of that foreseen for 2011.

According to the Prime Minister Andrius Kubilius: ‘Determined and well developed policy adjustment leaded to the recovery of country’s economy and stabilization of public finances. We are among those who started consolidation early, thus now are well placed for closing an excessive deficit procedure and are continuing firmly towards the balanced budget‘.
After severe recession, country‘s economy started to show  signs of recovery already in 3rd quarter of 2009, returned to growth in 2010 with positive 1.3 outcome and with 6.6 per cent growth during the first half of 2011 country  is one of the fastest growing economies in the EU. Ministry of Finance forecasts 5.8 per cent expansion this year and GDP is expected to grow further in 2012.
According to the newly approved 2012 budget plan, the Government expects expenditures to remain the same as in year 2011 – 36,5 billion Litas and public revenues for 2012 are foreseen at 33,7 billion Litas. In addition to that European Union’s structural and other funds’ investments will make 7,2 billion Litas. Planned budget deficit for year 2012 – 2.8 per cent GDP is half of that foreseen for 2011 (5.3 per cent GDP).

Lithuania has initiated state owned enterprises (SOE’s) reform in 2010 as a part of fiscal consolidation, besides the already implemented austerity measures and tax increases that took place during the past few years. Commonly known that returns from SOE’s are considered not to inhibit economy, as both austerity and tax rises do, and increasing returns from SOE‘s is seen a more efficient and sustainable fiscal measure than privatization during the economic slowdown.

Thus the government set a priority to increase dividends through improved management and performance of SOE’s rather than benefiting from the asset sales.

The commercial assets portfolio has shown a substantial potential for efficiency improvement and thus start to generate adequate income to the budget next year. SOEs contribute in dividend of 540 million Litas in Year 2012, which makes almost 0.5 per cent GDP. The dividend received from the state-owned commercial assets in year 2010 amounted to just over 41 million Litas and 86 million Litas in year 2011.

‚Lithuania‘s strategy on SOE‘s is still under implementation, however the first results show that significant returns from state-owned enterprises are achievable  within 12-18 months time frame. Returns of such a reforms may be very substantial already in one year period‘- states Minister of Economy Rimantas Zylius.

Source: www.ukmin.lt