Lithuanina Growth Q2 2007

From Bloomberg:

Lithuanian Growth Slowed to 8% in Second Quarter (Update1)

By Milda Seputyte

July 27 (Bloomberg) -- Lithuania's economic growth slowed to a preliminary 8 percent in the second quarter, easing concern that the Baltic economy may overheat.

Gross domestic product growth slowed from 8.3 percent in the first quarter, the Vilnius-based statistics office said in an e- mailed statement today. The expansion in the first half was 8.1 percent, led by construction, retail sales and real-estate transactions, the office said.

The Baltic states of Lithuania, Estonia and Latvia were warned by credit rating companies that their economies, among the four fastest-growing in the European Union, are increasing too fast. A more-gradual slowdown suggests Lithuania may cap inflation and meet terms to adopt the euro around the end of the decade.

``Despite this minor slowdown, growth is impressive,'' Jekaterina Rojaka, an economist with DnB Nord in Vilnius, said in a telephone interview. ``We were much more pessimistic at the beginning of the year with much, much lower estimates. Credit portfolios still keep growing faster than expected.''

Annual credit growth slowed in the first half to 47.1 percent, compared with 59.7 percent in the same period last year, the Lithuanian central bank said yesterday. That's ``too little of a change,'' Rojaka said.

Refiner Expansion

The economic expansion is unlikely to slow in the second half as Lithuania's biggest exporter, refiner AB Mazeikiu Nafta, plans to operate at full capacity later this year, Rojaka said. Mazeikiu had to cut production by half in the last six months of last year due to a fire.

Retail sales, the second-biggest component of the economy, increased an annual 21.3 percent in the first half, the statistics office said in a separate report. Clothing sales rose an annual 37.4 percent.

Lithuania's application to adopt the euro at the beginning of this year was rejected because the inflation rate exceeded EU criteria. The government refuses to set a fixed target date, saying the best time for euro adoption will begin in 2010 when inflation is expected to slow.

The inflation rate was unchanged for the last three months ending June at 4.8 percent, the highest in more than eight years.