Banks lower growth forecasts for Lithuania on Brexit

Growth forecasts
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Lower levels of growth in the eurozone as a result of Brexit will negatively affect the growth of Lithuanian exports cutting economic growth rates in the next two years, Danske Bank said yesterday.

Danske Bank experts lowered their growth forecasts for the Lithuanian economy from 2.8% to 2.5% in 2016 and down from 3.2% to 2.7% in 2017. It also lowered its forecasts for this year‘s eurozone economic growth from 1.6% to 1.2%, and from 1.7% to 0.7% next year.

The bank said the United Kingdom‘s decision to leave the EU will affect all community economies, political and economic insecurity will weaken the eurozone‘s corporate investments and consumption.

“The eurozone is the main Lithuania‘s export partner where almost half of Lithuana‘s goods and services are exported. However, the prevailing turmoil and insecurity in the single currency zone currently negatively affects corporate investment and consumption. And this affects Lithuania‘s exports,” said Rokas Grajauskas, Danske Bank chief economist in the Baltic countries.

“Lithuania is the most remittances-dependent country in the EU, while the United Kingdom is the main source of remittances. A quarter of all transmissions of emigrants‘ money are coming from this country. However, the expected recession in the United Kingdom and the falling pound can reduce the volume of remittances and thereby reduce consumption in Lithuania by at least a few tenths of a percent,” said Grajauskas.

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