OREANDA-NEWS. February 12, 2007. Current account balance. In December 2007, the deficit in the current account of the country’s balance of payments was LTL 878,9 million, showing an increase of 37,8 percent compared to November, and an increase of 6,4 percent compared to CAD in December 2006, reported the press-centre of Bank of Lithuania.

Based on the three-quarter data for 2007 and the October-December data for the same year, in 2007, CAD was LTL 12,7 billion, an increase of 44.6 percent compared to 2006. In 2007, CAD accounted for 13,2 percent of GDP (in October-December 2007, CAD made up LTL 3,1 billion accounting for 11,3 % of GDP). The rise resulted from an increase of LTL 2,3 billion in foreign trade deficit and an increase of LTL 2 billion in income balance deficit.

According to the Department of Statistics under the Government of the Republic of Lithuania, the December 2007 exports of goods grew by 4,7 per cent, and imports of goods went down by 7,1 percent month-on-month.

In January-December 2007, exports and imports of goods went up respectively by 11,2 and 14,5 percent compared to January-December 2006, while foreign trade deficit widened by 23,4 percent to LTL 17,8 billion). The export growth during this period was mainly driven by an increase in the exports of plastics and articles thereof (74,8%), fertilizers (48,9%), ground vehicles (23,5%), machinery and mechanical appliances (21%). Import growth was driven by an increase in the imports of vehicles (41,2%), organic chemicals (by 2,1 times), and electrical machinery and equipment (20,2%).

In January-December 2007, Lithuania’s exports to the EU27 Member States grew by 13,2 percent, and imports from these countries rose by 24,2 percent. Exports to the CIS countries went up by 28 percent, while imports from them shrank by 9,6 percent.

In 2007, the Lithuania’s main export partners were Russia (15%), Latvia (12,8%), Germany (10,5%), and Poland (6,3%), while the main import partners were Russia (18,2%), Germany (14,9%) and Poland (10,6%).

In December 2007, a month-on-month growth of export of services made up 3,7 percent, import of services accounted for 6,8 percent, eventually, the total positive surplus of the balance of services decreased by 3,9 per cent to LTL 243,1 million). In January-December 2007, as compared to the same period in 2006, export of services increased by 3,3 percent, while import of services grew by 11,6 percent. The positive surplus of the balance of services in 2007, compared to 2006, declined by LTL 483 million or 16,3 percent.

In December 2007, payments to non-residents (on their investment in Lithuania) made up LTL 536,6 million, while the income of domestic economic entities on investment abroad made up LTL 136,8 million. In December, the deficit in the balance of investment income formed LTL 399,8 million, a increase of 38,5 percent compared to November. In November, the balance of labour income was positive at LTL 34 million, while total income balance deficit made up LTL 365.8 million (in November it equalled to LTL 256,9 million).

In January-December 2007, the income balance deficit widened by 90,4 percent year-on-year, up to LTL 4,3 billion).

The surplus in the balance of current transfers stood at LTL 295,5 million in December 2007 (in November 2007, it was LTL 153,3 million). 2006). The significant increase in surplus was determined by transfers from the EU support funds, which increased by 2,5 times. Funds from the European Agricultural Fund for Rural Development accounted for major amount of these transfers (LTL 210 million).

The January-December 2007 positive surplus on the balance of current transfers increased year on year by LTL 895,9 million or 44,9 percent to LTL 2,9 billion). Over 2007, transfers from the EU support funds grew by 52,6 percent, while remittances by individuals went up by 43,6 percent.

Capital and financial account balance. In December 2007, the flow of investments abroad by domestic economic entities, excluding official reserve assets, made up LTL 1,9 billion. The flow of foreign investment in Lithuania amounted to LTL 3,1 billion; as a result, the net total investment flow (taking into account investment flows to/from the country) was positive at LTL 1,2 billion.

In 2007, the outward investment flow equalled to LTL 6,2 billion, while the inward investment flow was LTL 22,1 billion in Lithuania. Year on year, the outward investment flow grew by 22,5 percent, while inward investment flow went up by 24,3 percent. In December, non-repayable capital transfers made up LTL 15 million, while in 2007, they amounted to LTL 1,5 billion (LTL 963,3 million in 2006 ).

In December 2007, foreign direct investment flow in Lithuania reached LTL 409,9 million. Taking into account foreign direct investment by domestic economic entities, the December net foreign direct investment flow made up LTL 291,9 million. Meanwhile, in 2007, foreign direct investment flow in Lithuania reached LTL 5,1 billion from LTL 5 billion in corresponding period in 2006), while the net flow was LTL 4,2 billion.

In December 2007, net portfolio investment flow was negative at LTL -340,9 million, while in 2007 it amounted to LTL -989,1 million).

Net flow of other investments and financial derivatives was positive in December 2007 amounting to LTL 1,2 billion; it made up LTL 12,6 billion for 2007, an increase of 37,7 percent compared to 2006. An increase in the liabilities of domestic MFIs had the largest impact on the total positive flow of this investment. The sector’s net investment flow was LTL 9,9 billion in 2007, an increase of 62,9 per cent year-on-year.

At the end of December 2007, official reserve assets made up LTL 18,2 billion (an equivalent of EUR 5,3 billion or USD 7,7 billion). They decreased by LTL 48,9 million or 0,3 percent in December; however, throughout 2007, official reserve assets went up by LTL 3 billion or nearly by one fifth (in the balance of payments these flows made up respectively LTL 52,8 million and 2.9 billion).

The major reason behind the December decrease of official reserve assets was a drop of LTL 2,2 billion in deposits of the central government with the Bank of Lithuania. However this drop was to a large extent offset by an increase of LTL 1 billion in external liabilities of the Bank of Lithuania, as well as an increase in deposits of other MFIs with the Bank of Lithuania and currency in circulation by LTL 817,6 million and LTL 320,3 million, respectively.

The growth of official reserve assets in 2007 on one hand was driven by deposits of other MFIs with the Bank of Lithuania and currency in circulation, which grew by LTL 1,13 billion and LTL 1,11 billion, respectively, and, on the other hand, by external liabilities of the Bank of Lithuania and other factors, which grew by LTL 835,6 million and LTL 321,8 million, respectively.