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V. Vasiliauskas: Global and Lithuania’s economic development accelerating, but growth impact not to be felt by everyone due to income inequality

April 20, 2017

Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, has arrived in Washington to attend meetings of the International Monetary Fund (IMF), at which the heads of world central banks and Finance Ministers will search for solutions on how to reduce growing income inequality. Exclusive attention is devoted to the inequality issue in the latest World Economic Review as well, published on the eve of the IMF meetings.

‘Growing inequality in income and opportunities is an issue that is especially relevant to us as well. While we are reasonably excited at the economy’s recovery and growth, the gap between the richest households and those with the lowest income continues to be unjustifiably large; hence, people’s feelings about economic growth vary, and not everyone’s quality of life has been improving,’ said Vitas Vasiliauskas.

He emphasised that the unjustifiable income gap leads to painful social implications that may be long-lasting; it is therefore necessary, in formulating and implementing modern taxation and social policies, for our focus to be targeted on namely the reduction of social exclusion.

IMF experts note the correlation between growing inequality within countries and spreading protectionist sentiment.

‘Protectionist sentiment arising in advanced economies is raising major concerns, as globalism has contributed to economic growth and a decrease in poverty in the world. The IMF should continue supporting ideas of a global economy, thereby bringing together the efforts of countries to immediately deal with the income inequality issue and support these efforts with relevant analytical materials and expert evaluation,’ claimed Vasiliauskas, who will take part in the IMF discussions in Washington on global economic development.

In assessing the outlook for the global economy, the IMF indicates that this year the pace of economic development will accelerate compared to a year ago – both in advanced economies and developing countries. However, the IMF emphasises that certain structural issues, such as adverse demographic trends, weakening labour productivity in advanced economies, continue hindering the pace of economic growth.

Compared to the IMF’s autumn forecast, the forecast for Lithuania’s economic growth has been revised slightly downwards – to 2.8 per cent (from previously 3%), but the IMF still expects our economy to grow stronger than last year. The IMF also expects the unemployment rate in Lithuania to gradually decrease further.

Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, is Member of the Board of Governors of the IMF. During his visit in Washington, he will attend meetings of the IMF’s International Monetary and Financial Committee, the Nordic-Baltic constituency, and the consultancy group G30. Meetings with Poul M. Thomsen, Director of the IMF’s European Department, heads of the IMF missions in Russia, Belarus, USA and the euro area are also planned. A meeting with Valerija O. Gontareva, Governor of the National Bank of Ukraine, who has informed about her resignation, is also to take place. In the last three years she contributed significantly to the restoration of the credibility of Ukraine’s financial system.