Lithuania - Economy

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Until 1940, Lithuania's economy was primarily agricultural, mainly in the form of dairy farms and livestock raising. The main industries are machine building and metalworking, although light industry and food processing are also well developed. Like the other Baltic states, Lithuania has few natural resources, primarily peat and amber.

Due to modernization that occurred during Soviet dominance, Lithuania built up a large, if somewhat inefficient, industrial sector that in 2001 accounted for 32% of the country's economy.

The service sector is 61% while agriculture accounts for about 13% of the economy.

In 1992, Lithuania's GDP fell 21.6%. In that year, the government adopted an IMF-directed program aimed at privatizing the economy, controlling inflation, eliminating price controls, and lowering the budget deficit. In June 1993 Lithuania's convertible currency, the litas, was introduced, setting off another round of inflation, while GDP continued to decline, by 16.2% in 1993 and 9.8% in 1994. In 1994, the government entered into a three-year arrangement with the IMF under its Extended Fund Facility (EFF) aimed primarily at bringing inflation under control. 1995 was the first year of positive growth(3.3%) since independence, although unemployment remained high, at 16.4% in 1995. Inflation, which was still in double digits in 1996 (23%), fell to single digits (5.1%) by 1998 and unemployment fell to 6.4%. The economy registered real growth until 1999—4.7% in 1996, 7.3% in 1997 and 5.1% in 1998— but then was overtaken by the effects of the August 1998 financial crisis in Russia, still one of Lithuania's largest trading partners. Real GDP declined 3.9% in 1999 as unemployment jumped to 8.4%. Inflation remained under control, however, at0.3%. Growth returned in 2000, with real GDP up 3.3%, but unemployment continued to soar, peaking at 13.2% in March 2001. Growth in 2001 was 5.9%, above expectations, and in the first half of 2002, growth averaged about 5.6%. In February 2002, the government repegged the litas from the US dollar to the euro, at a rate of 3.4528 litas per euro. Inflation was about 1% for the year and by December 2002, unemployment had moderated to 10.9%. About 80% of Lithuanian's enterprises have been privatized since independence, and by 2002 over 25% of its trade was with countries outside the old Soviet bloc. Lithuania acceded to the WTO 31 May 2001 and expects to admitted to the EU in 2004.

Also read article about Lithuania from Wikipedia

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