Increase in GDP totals two percent in Lithuania

Increase in GDP totals two percent in Lithuania Lithuania has made a significant progress during the past years with regard to both political and economic development. Being an EU membership candidate while also aiming at the WTO membership in the foreseeable future, Lithuania represents an increasingly interesting operating environment for MeritaNordbanken and its clients. Lithuania's potential membership in NATO plays also an important role as international investors assess the country as a potential investment target. MeritaNordbanken (MNB) has published its new Lithuania Country Report, which belongs to a series of regular country reports on the Baltic Rim countries. According to MeritaNordbanken, Lithuania has already hit the bottom of the economic cycle and GDP is expected to grow by 2.0% this year and accelerate to 4% and more during the next few years. A significant resurgence of GDP growth is not expected until the second half of the year, however, and will remain dependent on exports. MNB sees Lithuanian inflation at 2.5% this year and at 4.8% and 4.3% in 2001 and 2002 respectively. The 2.8% deficit budgeted for this year is seen as ambitious and, if implemented, would restrict the growth of domestic demand, which will likely continue weak. MNB emphasises that Lithuanian monetary policy statements have not been very consistent lately, while the upcoming October parliamentary elections will add to political uncertainty. On the one hand, Lithuanian central bank has been planning a repeg of the litas to the euro in mid-2001 at the earliest while on the other hand the Bank of Lithuania has pointed out that a float of the currency before the EMU membership is possible. A controlled rate adjustment would be safer for the economy. MNB believes that repegging of the litas to the euro this year is not likely if the euro strengthens. This year the still weak macroeconomic situation in Lithuania would make a float very risky. This might result in an uncontrolled devaluation which would not be reasonable for political or currency board credibility reasons. Vilnius branch was opened in May MeritaNordbanken Group opened two branches in Vilnius, Lithuania in May. The banking groups' leasing company, MNB Finance Lit Ltd, operates also in Vilnius. The home market of the new bank to be formed of MeritaNordbanken Group and Unidanmark (Nordic Baltic Holding) comprises the Nordic countries, the Baltic States and Poland. In Tallinn, Estonia, the Group has two branches, one salespoint and a finance company. A third branch will be opened in Tartu in June. In Latvia it has two branches and a finance company. In Poland MeritaNordbanken owns 49.9% of Bank Komunalny in Gdynia. A new branch will also be opened in Warsaw in June this year. Further information: Vice President Henri Malvet, Trading, tel. +358 9 165 50150 Analyst Kristiina Vares, Financial Markets Research, tel. +358 9 165 50234 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/29/20000529BIT00750/bit0001.doc http://www.bit.se/bitonline/2000/05/29/20000529BIT00750/bit0002.pdf