VILNIUS, Nov 27 (Reuters) - Lithuania's economy shrank 14.2 percent in the third quarter year-on-year, and a 6.1 percent expansion in quarterly terms was not enough to convince analysts the small Baltic Sea country is now on a growth track.
The data was little changed from a flash estimate a month ago -- showing an annual contraction of 14.3 percent and quarterly growth of 6.0 percent -- and left the nation as one of the worst performing countries in the European Union.
"The Lithuanian economy is not yet out of the woods, and difficult times are expected to still be ahead," said Nordea economist Annika Lindblad.
"As there are no signs of a sustainable improvement especially in the domestic economy, we remain cautious on the growth prospects for the last quarter of the year," she added in a commentary on the data.
Economists pointed to still very steep contractions in domestic demand and another dive in October retail sales, none of which points to any sort of pick up for manufacturing and the broader domestic economy.
The statistics office said all economic sectors except agriculture showed an annual decline in the third-quarter, with construction recording a 45 percent drop.
Exports fell 17.4 percent year-on-year in the third quarter, but it was up 11.8 percent quarter-on-quarter, the statistics office said.
Lithuanian GDP fell a quarterly 7.7 percent and annual 19.5 percent in the second quarter.
Lindblad said the decline in exports slowed from -23.4 percent year-on-year in the second quarter to -17.4 percent in the third quarter. Imports continued to decline by over 30 percent, which she said pointed towards weak domestic demand.
Danske Bank economist Violeta Klyviene said the fourth quarter GDP fall would likely be less than 14 percent, but also saw the outlook as cautious.
"We haven't seen a real sign of recovery, retail trade remains very poor," she said. The statistics office said retail sales fell 28.7 percent year-on-year in October, slightly better than the 31.6 percent fall in the previous month.
Like neighbouring Latvia, Lithuania's government is running an austerity budget of spending cuts and tax rises this year and next, though its fiscal deficit will still top 9 percent of GDP. At the same time, Lithuania wants to avoid having to turn to the International Monetary Fund for help, as Latvia had to do.
All three Baltic countries have also elected to keep their currency pegs to the euro without devaluaing, instead following what economists call an internal devaluation of slashing wages and prices to regain competitiveness in the downturn.
(Reporting by Nerijus Adomaitis and Patrick Lannin; editing by Patrick Graham) Keywords: LITHUANIA GDP/

(nerijus.adomaitis@reuters.com; +370 641 913 86; Reuters Messaging: nerijus.adomaitis.reuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.