While international situation is a cause for some concern, Lithuania's financial system is stable enough and banks are resilient to possible shocks, according to the central bank's overview. Financial imbalances in the Nordic countries are, however, a risk.
“The economic cycle is in the growth phase. [...] Financial situation of households is improving,” Vitas Vasiliauskas, the governor of the Bank of Lithuania, told reporters on Thursday. “The international situation remains unstable and affects our open economy.”
Trade wars and Brexit are some of the risks that “keep us on our toes”, according to Vasiliauskas.
The real estate market in Lithuania is on the upswing, according to the Bank of Lithuania governor, as growing wages encourage people to take out more mortgages.
Last year saw the biggest number of home purchases per capita in three decades and mortgages are on the rise, while lending to businesses have slowed down.
According to Vasiliauskas, despite higher lending to households, indebtedness is well below the 2008 levels.
Risks from the north
Nordic banks make up a big share of Lithuania's financial system, which is therefore exposed to risks emanating from Scandinavia, the Bank of Lithuania warns. These include housing bubbles and high household indebtedness in Sweden and other Nordic countries.
Nordic banks have also took a hit to their reputation following money laundering scandals.
However, the dependence of Lithuanian financial system on Nordic banks has been consistently decreasing, Vasiliauskas said.
