OREANDA-NEWS. March 31, 2008.
Current account balance. In January 2008, the current account deficit (CAD) of the country’s balance of payments was LTL 1,4 billion, showing an increase of 55 percent compared to December 2007 and an increase of 72,5 percent compared to CAD in January the same year, reported the press-centre of Bank of Lithuania.

This increase was a result of the growth of foreign trade deficit by LTL 345,7 million and a decline of LTL 255,9 million in positive surplus on the current transfer balance.

According to the data of the Department of Statistics under the Government of the Lithuanian Republic, in January 2008 export of goods increased by 23,4 percent, while import of goods grew by 25,1 per year on year. In January this year, month-on-month export and import of goods increased by 4 and 7,2 percent, respectively.

The export growth during this period was mainly driven by an increase in the exports of processed crude oil (91,3%), fertilisers (84%), grain (6,8 times), machinery and mechanical appliances (14,1%). Meanwhile, the growth of imports was supported by increase in import of crude oil and gas (2,1 times) and ground vehicles (22,1 percent).

In January 2008, the main Lithuania’s export partners were Russia (13,2%), Latvia (12,9%), Germany (9,2%), and United Kingdom (6,1%), while the main import partners were Russia (28,3%), Germany (11,5%), Poland (9,2%), and Latvia (5,3%).

Year on year, the January 2008 export of services increased by 7,3 percent, while import of services declined by 0,4 per cent. Compared to December 2007, in January this year export of services went down by 23,3 percent, while import of services contracted by 16,1 percent. Total positive surplus on the balance of services went up by 56,3 percent compared to January 2007 to reach LTL 137,9 million.

In January 2007, payments to non-residents (on their investment in Lithuania) made up LTL 444,3 million, while the income of domestic economic entities on investment abroad made up LTL 167,4 million. In January, the deficit in the balance of investment income formed LTL 276,9 million, an increase of 9,3 percent year on year and a decrease of 30,7 percent month on month. In January 2008, the balance of compensation of employees was positive at LTL 36,5 million, while gross deficit of income balance made up LTL 240,4 million (in January 2007 it was LTL 219,8 million).

The surplus of the balance of current transfers stood at LTL 18,1 million in January 2008 (LTL 274 million in January 2007, and LTL 295,5 million in December 2007). This significant narrowing of the surplus came as a result of a decrease of transfers from EU support funds.

In January this year, transfers from EU support funds went down 3,1 times compared to January 2007. Meanwhile, remittances by individuals grew by 14,9 percent during the period under review.

Capital and financial account balance. In January 2008, the flow of investments abroad by domestic economic entities, excluding official reserve assets, showed a decrease and amounted to LTL 369,5 million. The flow of foreign investment in Lithuania reached LTL 140,4 million; as a result, the net total investment flow (taking into account investment flows to/from the country) was positive at LTL 509,9 million.

In January, non-repayable capital transfers stood at LTL 284,9 million (LTL 131,7 million in January 2007, and LTL 15 million in December 2007).

In January 2008, foreign direct investment flow in Lithuania reached LTL 136 million. Taking into account an increase in foreign direct investment by domestic economic entities abroad, the December net foreign direct investment inflow made up LTL 6,9 million only. Meanwhile, in January 2007, foreign direct investment flow in Lithuania reached LTL 745,2 million and the net inflow was LTL 619,5 million.

In January 2008, the net portfolio investment flow was negative at LTL 11,4 million. This happened due to bigger decrease in liabilities (compared to foreign assets).

In January 2008, the net flow of other investments and financial derivatives was positive at LTL 514,5 million, a decrease of 45,6 percent year on year and a slump of 2,4 times compared to December 2007. A decrease in the net flow of investments of domestic MFIs had the highest impact on the decrease of this flow of investments. In January 2008, the net flow of investments of this sector reached LTL 450,5 million, while in January 2007 it was LTL 842,5 million.

At the end of January 2007, official reserve assets made up LTL 18 billion (an equivalent of EUR 5,2 billion or USD 7,7 billion). During January, they decreased by LTL 235,8 million, i.e. by 1,3 percent.

The major reason behind the decrease of official reserve assets was the contraction of the deposits of other MFIs with the Bank of Lithuania and currency in circulation by LTL 626,4 million and LTL 572,5 million, respectively. The decline was offset, substantially, by the increase of LTL 570,7 million in Central government deposits with the Bank of Lithuania, also by an increase of LTL 212,6 million in external liabilities of the Bank of Lithuania, as well as other factors, which grew by LTL 179,7 million.