Vilnius - Lithuania looks set join Baltic neighbours Estonia and Latvia in recession soon, after figures released by the Lithuanian statistics office Tuesday said GDP fell by 1.5 per cent in the last quarter of 2008 compared to growth of 2.9 per cent in the third quarter.

Estimated average growth for the whole of 2008 was 3.2 per cent.

"Today's GDP figures confirmed our expectation that the economic development in Lithuania is lagging behind the other two Baltic countries, which are already in recession," commented Danske Bank analyst Violeta Klyviene.

"We expect the economy to further slow and slip into recession in the first quarter of this year. For 2009 as a whole, we anticipate growth to decline in the range of 3 to 5 per cent year-on-year, on the back of an unfavourable external outlook and falling domestic demand."

The ongoing slump in property, weakening labour market and significantly tighter fiscal policy will depress domestic demand for quite some time, Klyviene said, adding that Danske Bank did not expect a significant rebound in growth until 2011.

Speaking during a visit to Estonia, Lithuanian prime minister Andrius Kubilius admitted that tough times were ahead.

"According to our forecasts, the recessio in Lithuania will be around minus 4.5 per cent (of GDP)," he said.

Kubilius predicted a figure of minus 2 per cent for 2010 but was optimistic about the following year.

"The year 2011 will be the year of recovery and growth. The European basketball championship will also be in Lithuania - which we will win," he promised. (dpa)