Is credit expansion in Lithuania a matter of concern?

Lithuania ranks among the fastest growing economies in the European Union. The current credit expansion is a major factor supporting GDP growth, but the credit dynamic casts some doubt on its sustainability. Certain factors raise the question of whether there are signs of a potential unsustainable credit boom. While public and private indebtedness-to-GDP ratios are not a matter of concern, several indicators call for prudence, as the domestic demand stimulus induced by credit growth could exacerbate imbalances and information about private sector hedging against interest rates and foreign exchange exposure is limited.

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