"While it is essential that competitiveness gains are not eroded, it is also important to ensure that low-income workers earn a sustainable wage. For this reason, we support a moderate increase in the minimum wage in conjunction with measures to improve job matching and reduce obstacles to job creation," the fund's experts said in a concluding statement after their visit to Vilnius this week.
At the end of last year, the IMF recommended that Lithuania should not increase the minimum salary. James Morsink of the fund then said that raising of the minimum wage could slow job creation and reduce competitiveness.
The government proposes to raise the minimum monthly salary by 50 litas (EUR 14.5) to 850 litas in July and buy another 50 litas to 900 litas at the start of next year. Employers and trade unions call for increasing it by 100 litas in July.
Nationalization of Snoras gave strength
The nationalization of Snoras has strengthened Lithuania's banking system, IMF experts said after completing their visit to Vilnius on Thursday.
"The intervention of Snoras bank removed a major source of financial sector vulnerability, and the authorities' careful management of the process was crucial to maintaining banking sector stability," the IMF team said in their concluding statement.
"The banking system as a whole has increased its resilience: non-performing loans are declining, capital adequacy is rising, liquidity ratios are well above the regulatory minimum, and most banks have continued to be profitable," they said.
The experts noted that "the Bank of Lithuania's stepped up onsite inspections, strict stress testing, and careful monitoring of banks' loan loss provisions are essential for the continued health of the banking system and to ensure that any remaining pockets of weakness are addressed."
Vitas Vasiliauskas, the central bank's governor, said on Wednesday that the country's financial system was stable, with the impact of Snoras' bankruptcy having been short-lived, but added that the global economic development required special vigilance, as the greatest risks for the system coming were from external factors.
He said that stress-testing results had shown that the Lithuanian banking system was capable of withstanding severe shocks, but capital buffers needed to be further increased.
Tremendous progress
The International Monetary Fund has revised its Lithuanian GDP growth forecast for this year upwards to 2.75 percent.
The fund forecast in mid-April that the Lithuanian economy would expand by up to 2 percent in 2012.
"One of the key findings is the tremendous progress that has been made in Lithuania since the crisis in 2008. This progress has been due to the determined policy implementation by the government. We see the growth has returned and recovery is underway. Obviously this year growth will be lower, because of the external environment and the risks arising from this environment," Julie Kozack of the fund's European Department told reporters after meeting with Prime Minister Andrius Kubilius on Thursday.
"And there some other challenges still facing the country, including high unemployment, and a need to resolve some remaining vulnerabilities and a need to continue with the fiscal consolidation. But the overall picture is one of the country being on the road to recovery. The recovery is underway. We also see its recovery continuing over the medium term," she said.
Kozack is the head of an IMF mission that completed work in Lithuania on Thursday.
As part of the regular mission, the fund's experts analyzed Lithuania's macroeconomic situation and assessed its economic development trends, the situation in its financial sector and the implementation of the budget and social policy measures.
