Amidst an intricate tapestry of economic patterns and forecasts, the Lithuanian Government has recently procured a loan of 45 million euros. This borrowing, set for a period of 2 years and 8 months, occurred during a government securities auction that unfolded on Monday. The event witnessed an overwhelming response from investors, with demand more than doubling the supply and reaching a total of 104.5 million euros.
Decreasing Borrowing Costs
The auction was a supplementary one for the emission due on August 2, 2026. This emission had previously been augmented a month ago, with a borrowing cost of 4.056%. However, the latest borrowing episode revealed a significant drop of 24 basis points, with the average interest rate being 3.817%. This not only indicates a cheaper borrowing rate but also underscores efficient debt management efforts by the government.
Investor Interest Outpaces Supply
During the last addition of the same emission, the demand had escalated to a total of 120.13 million euros, doubling the supply at the time. This surge in investor interest, coupled with the reduced borrowing cost, provides an insightful window into the current investment climate and the government's cost of borrowing.
Baltic Economic Forecasts
While Lithuania revels in its successful borrowing, contrasting economic forecasts loom over the Baltic region. Lithuania has started to witness an upswing in economic activity, primarily driven by growing optimism in the manufacturing sector. However, the Baltic States grapple with the pressure of inflation, high energy prices, declining real incomes, weak external demand in the manufacturing sector, and rising interest rates, all of which have significantly impacted GDP growth.
Yet, the issuance of new loans in the Baltic countries has continued unabated, despite the high interest rates. Forecasts for 2024 anticipate that the GDP of the Baltic countries will once again tread the path of moderate growth, estimated to be between 2.3 to 2.6 percent.