In 2017, the rate of growth of the Lithuanian economy gained greater momentum owing to the improvement in the global situation. Global demand for investment goods swelled up, significantly improving the result on foreign trade. This growth in investment translated favorably into the development of imports and exports in a number of countries, including Lithuania’s key trading partners. Another driver of growth in trade was the improved situation in countries with a heavy dependence on exports of commodities, which benefited from price hikes on the global market (mainly Russia, whose imports affect the results of foreign trade throughout the region). Accordingly, it is estimated that real GDP will increase by 3.6% in 2017 (seasonally adjusted data).
Inflation remained at a higher level, having reached 3.9% at the end of the year. Changes in prices remained affected by the domestic economic situation and shifting trends in the global commodities market. In the last months of 2017, the latter drove hikes in consumer prices above the previously expected levels. This increase was caused by changes in the commodity markets and Lithuania was not the only country affected by them. A similar phenomenon, that is hikes in food and fuel prices, was also observed in other EU countries.
1 Lithuanian economic review, 12/2017, published by the Bank of Lithuania.
The increase in GDP in Q3 2017 jwas consistent with the quick estimate and stood at 6.2% y/y (seasonally adjusted data). The improved picture of the Latvian economy in 2017 was driven by progress in almost every sector, including the construction industry, following its last year’s slump.
Since the end of 2016, the balance of foreign trade has mirrored the recovery in the global economy. Exports of Latvian goods and services were on the increase. During the first ten months of 2017, exports grew by 9.6% y/y. The continuous improvement in the financial standing of Latvian trading partners and increasing prices throughout the world were the main factors driving the value of exports.
According to data published by the Central Statistical Office of Latvia, the annual inflation rate in December 2017 was 2.2%. On a month-to-month basis, the prices of non-food products decreased slightly, whereas the prices of services increased. The latter hikes were driven by greater demand resulting from a sharp increase in wages. Although the price increases of certain food products remain high in annual terms, in recent months more moderate price hikes and even declines in certain cases have been recorded.
2 Monthly Newsletter, 01/2018, Bank of Latvia
In 2017, the Estonian economy, in line with its regional counterparts, grew stronger. According to data published by the Bank of Estonia, the annual GDP growth in Q3 was 4.2%. Like in other Baltic states, the spark that pushed the Estonian economy forward was the improvement in the economic situation of Estonia’s trading partners and other European economies. According to forecasts presented by the Bank of Estonia, GDP growth in 2017 will surpass 4%, which will be the highest rate of growth in the last six years.
The consumer price index (CPI) moved up 3.4% in 2017, compared to the previous year. The annual shift in this indicator was again driven largely by food prices and was heavily affected by price changes in the external environment. Lower production led to higher prices in global markets to the largest extent in dairy products. Increasing energy prices also had their share in the overall impact.
4 Estonian economy and monetary policy, 4/2017, published by the Bank of Estonia
5 Data published by the Estonian Statistical Office
2017 was a yet another year of improvement in the country’s economic and political situation. In Q3 2017, Ukraine’s GDP grew 2.1% compared to the corresponding period of the previous year. For the third year in a row, the inflation rate has remained high. In 2017, it stood at 13.7%. The inflation rate was driven largely by the following factors: increases in government-regulated prices (of gas, electricity and water), increases in the minimum wage (twice in 2017) and higher incomes of the population. Adverse weather conditions and poor agricultural production of certain fruits and vegetables also contributed to the increase in inflation.
After 11 months of 2017, a negative balance of foreign trade in goods and services was recorded (USD -5,775 million). This was another offshoot of the unresolved conflict in eastern Ukraine. The loss of control over the resources in the eastern part of the country curtailed Ukraine’s export capacity (due to disrupted mining production and electricity generation).