Lithuanian Financial Minister Rules Out Currency Devaluation

Guardian Unlimited (BRUSSELS)-Lithuanian Finance Minister Rimantas Sadzius on 22 January ruled out currency devaluation in his fast-growing Baltic country. Lithuania burdened with high inflation and a widening current account deficit. Sadzius said global financial turmoil did not increase the risk of a hard landing in Lithuania and two other Baltic countries, Estonia and Latvia -- all European Union newcomers with currencies pegged to the euro and economies expanding fast. Soaring inflation in December and expectations of more price pressure in 2008; renewed financial market speculation this month that currency devaluation was a real risk in one or more of the three Baltic States. (Reliability: 8)


Comment:

Credit rating agencies have cited a widening current account deficit as one of the signs that Lithuania's economy risks overheating and a hard landing.Lithuania's current account gap widened by 79.5 percent to USD $594 million in November from the previous month and was up 11.5 percent on the year. Officials have said the rate could hit 10 percent in the first half of 2008.