Declared national independence from the former Soviet Union for Lithuania came in 1990. The nation’s next great stride was achieving European Union membership in May 2004 followed by entrance into ERM II mechanism in June 2004. Lithuania’s population of 3.6 million is now well on its way of having a new national currency in due course, the Euroland euro.
Economic Statistics
Total GDP as measured by purchasing power parity stands at $49.4 billion USD (2005) with corresponding GDP/Capita at $13,700 USD. GDP as measured by market prices stands at $24 billion USD. Real GDP growth for 2005 at 6.4 percent, year 2004 at 6.75 percent, year 2006 projected at 6.5 percent. Inflation for 2005 at 2.6 percent, 2004 at 1.25 percent, 1997 at 8.6 percent, year 2006 estimated at 2.5 percent. The current account deficit came in at $1.87 billion USD (2005), year 2004 shortfall at 8.5 percent of GDP. The fiscal deficit was at 2.25 percent. Official reserve assets measured $4.07 billion USD for January 2006. Unemployment is relatively low at 5.3 percent.
CURRENCY: ISO Symbol ‘LTL’, Lithuanian lit, litas (plural). At time of review on February 7, 2006, the Lithuanian lit was valued at 2.88 LTL to the US-dollar (USD) and/or 3.4527 LTL to the Euroland euro (EUR). The lit entered ERM II in June 2004 in preparation for euro adoption. ERM II mechanism provides for a minimum two year wait time to give countries the opportunity to show that they can keep their currencies stable. During this time, it allows them to further meet euro membership targets (Maastricht treaty) on interest rates, inflation, debt and fiscal deficits. A fluctuation band of typically 15 percent is initially set out, gradually narrowing as convergence nears.
CURRENCY HISTORY: in 1941, Soviet annexation of Lithuania brought in the Soviet ruble as new national currency and replaced then then litas out of circulation. In 1922, the original litas entered circulation. In 1993, the litas returned to circulation. From 1991-93, the talonas circulated which was essentially a substitute currency for the Russian rouble. From 1994, Lithuania implemented a currency board arrangement whereby 1 USD was in reserve for 4 LTL in circulation. In February 2002, the lit was then re-pegged to the EUR from the USD. Historical exchange quotes include year 2005 at 2.75 LTL to the USD, 2004 at 2.78, 2003 at 3.06, 2002 at 3.67, 2001 at 4, May 1994 at 4, year 1993 at 4.34 and 1992 at 1.773.
CURRENCY FORECAST: booming energy distributor for energy rich Russia next door although Lithuania itself is a net energy importer – oil & gas. Challenges include the nation’s large current account deficit which may potentially reflect in currency overvaluation for the lit. Euro adoption for Lithuania is set for early 2007, likely the first of January.
