OREANDA-NEWS. September 18, 2008. Current Account Balance. In July 2008, the deficit in the current account of the country’s balance of payments was LTL 714 million, showing a slump of 24.2 percent compared to June, reported the press-centre of Bank of Lithuania.

A decrease in the deficit on foreign trade balance and deficit on income balance as well as an increase in the positive surplus on the balance of services contributed to the decrease of CAD.

In January-July 2008, CAD amounted to LTL 8.29 billion, 5.5 percent above the figure for the corresponding period in 2007.

As reported by the Department of Statistics under the Government of the Republic of Lithuania, in July 2008 export and import of goods increased 2,8 percent and 1,7 percent, respectively, compared to June. In January-July 2008, a year-on-year increase of export and import of goods made up respectively 33.8 percent and 24.6 percent. Excluding mineral products, export of goods grew by 16.5 percent, and import of goods went up by 6.3 percent.

The export growth during January-July 2008 was mainly driven by an increase in the exports of mineral products (2.4 times), fertilisers (94.1 %), and grain (6 times). Import growth was driven mainly by an increase in import of crude oil and natural gas (2.5 times), railway locomotives, carriages and railcars and their parts (5.4 times), and fertilizers (2.4 times).

In January-July 2008, export of Lithuanian goods to the EU Member States accounted for 61.6 percent of total Lithuanian export of goods, while import from these countries made up 57 percent of total import of goods. Further increase of foreign trade volumes with CIS countries led to an increase of the CIS share compared to foreign trade turnover. It accounted for 23.7 percent of the national export of goods, and 34.5 percent of import of goods.

In January-July 2008, the main Lithuania’s export partners were Russia (15.1 %), Latvia (11.2 %), Germany (7.3 %), and Poland (6 %), while the main import partners were Russia (30.7 %), Germany (11.7 %), Poland (9.7 %), and Latvia (5.2 %).

In July 2008, month-on-month export of services increased by 12.2 percent, and import of services went up by 4.8 percent; consequently gross surplus on the positive balance of services hiked by LTL 70.2 million or 74.4 percent. In January-July 2008, year-on-year export of services grew by 2.1 percent, and import of services increased by 6.7 percent. For the reported period, gross surplus on the balance of services declined by 17.2 percent.

In July 2008, payments to non-residents (for their investments in Lithuania) made up LTL 425.7 million, and the income of domestic economic entities on investment abroad made up LTL 139.8 million.

In July, the deficit on the balance of investment income stood at LTL 286 million, a decrease of 16.9 percent month on month. Taking into account positive balance of compensation of emploees, in July 2008 gross income balance deficit amounted to LTL 248.6 million (LTL 308.2 million in June 2008). In January-July 2008, gross income balance deficit made up LTL 2.26 billion, a decrease of 3 percent compared to the corresponding period in 2007.

In July 2008, the surplus on the balance of current transfers amounted to LTL 248 million (LTL 253 million in June 2008). In January-July 2008, the surplus on the balance of current transfers was LTL 1.53 billion, equal to that in a corresponding period in 2007.

In January-July 2008, transfers from the EU support funds increased by 12.3 percent, and remittances by individuals went up by 4.2 percent year on year. Transfers from the EU support funds accounted for 40.6 percent of total current transfers, while remittances by individuals accounted for 52 percent. Lithuania’s contributions to the EU budget grew by 36 percent during the reported period, and remittances by individuals from Lithuania went up by 10.6 percent.

Capital and financial account balance. In July 2008, gross investments by domestic economic entities, excluding official reserve assets, made up LTL 1.38 billion, while gross inflow of foreign investments in Lithuania was LTL 778.7 million; eventually the net flow of total investments (taking into account investment outflow and inflow) was negative at LTL 606.2 million.

In January-July, gross outflow of investments equalled to LTL 3.02 billion, while gross inflow of foreign investments in Lithuania made up LTL 7.59 billion. A year-on-year gross outflow of investments by domestic economic entities went up by LTL 100.4 million, an increase of 3.4 percent, while gross foreign investment inflow decreased by LTL 1.83 billion or 19.4 percent.

In July, non-repayable capital transfers made up LTL 46.1 million, while in January-July 2008 it made up LTL 1.41 billion versus LTL 785.2 million in January-July 2006.

In July 2008 foreign direct investment inflow in Lithuania amounted to LTL 50.2 million. Taking into account foreign direct investment by domestic economic entities (they increased by LTL 101.1 million) net foreign direct investment flow in July was negative at LTL 50.9 million.

In January-July 2008, foreign direct investment flow in Lithuania amounted to LTL 1.88 billion, a decrease of 27.8 percent year on year. During the first six months of 2008 up to 16 per cent of the CAD was financed with foreign direct investment, while including non-repayable capital transfers - 39.3 per cent of CAD.

Net portfolio investment flow in July 2008 was negative at LTL 148.4 million. In January-July 2008, negative net flow of these investment amounted to LTL 1.23 billion, a result of an increase in portfolio investment outflows and a decrease in liabilities to non-residents.

In July 2008, net flow of other investments and financial derivatives was negative at LTL 406.9. The negative net flow showed that investment outflow was bigger compared to the inflow. Such situation resulted from the growth of short-term investments of monetary financial institutions (MFIs) abroad and contraction of the liabilities of the Bank of Lithuania.

In January-July 2008, net flow of these investments was positive, i.e. recorded net inflows at LTL 4.46 billion. The year-on-year positive net flow of other investments however went down by LTL 1.83 billion mainly because of a decrease in net inflows of domestic MFIs.

At the end of July official reserve assets made up LTL 15.2 billion (EUR 4.4 billion). In July, they decreased by LTL 1.04 billion or by 6.4 percent.

The contraction of the official reserve assets was determined by contraction of external liabilities of the Bank of Lithuania and deposits of other monetary financial institutions, which respectively made up LTL 650.5 million and LTL 289.7 million, and a decrease of LTL 273.4 million in central government’s deposits with the Bank of Lithuania.

The contraction of official reserve assets was offset partly by an increase in other factors and currency in circulation, which respectively made up LTL 119.9 million and LTL 51.8 million.