SSE.LT

Lithuania… had its foreign and local- currency debt ratings cut by Moody’s, which cited “severe pressure” on the budget…  a reversal of this trend [recession] is unlikely to occur within the medium-term rating horizon…  Subdued growth in western Europe will lead to diminished demand for Lithuania’s exports and less foreign investment… Domestic consumption is also likely to be limited by falling employment, wage cuts, a weakened banking sector and government budget consolidation.

A quite unexpected step from the Moody’s, reminding for all those “bottom searchers” where the country is heading. Additionally, statistic department reported consumer confidence index of  -40, compared to -47 in August and -26 a year ago.

The index shows net 40% of respondents believe consumption environment has deteriorated during the last 12 months.  The government contribution to the decline is the major thing to blame. It is not global slowdown, but Mr. Kubilius who decided the country will feel comfortable with deflation.

Lithuania consumer confidence

Moody’s rating cut means one big thing – 20% drop in GDP is not the end yet. As an opposite consequence to devaluation, the drop should be far deeper. The government was very reluctant to play aggressively: we didn’t devalue and we don’t cut expenditure. I am worried we don’t experience both soon. On the background of zero action, 20% drop in GDP is just a piece of cake. We shall be prepared for the real move.