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Lithuanian cuts growth forecast on China and Belarus trade worries

VILNIUS, Sept 27 (Reuters) – Lithuania’s central bank on Monday revised down its forecast for the country’s economic growth in 2021 to 4.9% from the 5.1% seen in June, largely due to expected trade disruptions with Belarus.

Next year’s growth forecast was also revised to 3.5% from 4.1%.

Further disruptions due to tensions with Belarus and China are a top risk to Lithuania’s economic growth, the central bank warned.

“We face big risks due to the pandemic and the geopolitics,” said Gediminas Simkus, central bank governor. “In the future, growth forecasts are more likely to be cut than to be increased.”

China demanded last month that Lithuania withdraw its ambassador in Beijing and recalled its envoy to Vilnius after Taiwan announced that its mission in Lithuania would be called the Taiwanese Representative Office.

Disruption to Lithuania’s exports to China could cut growth by 0.3% of gross domestic product, and the impact of other factors, such as already deteriorating rail freight transport from the Asian country, could be more painful, said Simkus.

“China supplies raw materials and intermediate products which are needed for Lithuanian producers. Finding other suppliers would mean discomfort and adaptation costs,” he added.

Lithuania said earlier its port will cease loading of Belarus potash, the major export of the landlocked country, starting in December.

The European Union has accused Belarus of encouraging Middle Eastern migrants to cross Lithuania’s border in order to put pressure on the bloc over sanctions Brussels has imposed on Minsk for human rights abuses. (Reporting by Andrius Sytas in Vilnius; Editing by Kirsten Donovan)

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