VILNIUS (AFP) -- Just six months before joining the European Union, the economies of the three Baltic states of Estonia, Latvia and Lithuania are booming, 13 years after emerging from the rubble of the Soviet Union.

In growth forecasts published by the European Commission in Brussels last week the three countries raced ahead of the pack, outstripping existing EU nations and the other seven future members with their growth prospects.

Lithuania, a country of 3.5 million, stood out. Once considered the poor relation of the three Baltic republics which restored independence from the Soviet Union in 1991, it is earmarked for 6.6 percent growth of gross domestic product (GDP) this year, on the back of what the EU executive said was "buoyant investment."

Growth is expected at 5.7 percent next year and six percent in 2005.

"The Lithuanian economy could be compared with a late spring," Gitanas Nauseda, an analyst and adviser to the president of Lithuania's biggest bank, Vilniaus Bankas told AFP. "In 1999-2000, when neighboring Estonia and Latvia were heading forward, Lithuania was slowly recovering from the effects of the Russian crisis. But this period was not in waste. Companies were modernizing and preparing for challenges and now we have a result."

"The main steps, which built a backdrop for a boost in the Lithuanian economy were made a few years ago," Ruta Vainiene, vice-president of the Lithuanian Free Market Institute told AFP. "First of all there was a tax privilege on profit reinvestment, which allowed and encouraged companies not to spend their profits but to modernize and build up their capacities. Now we see the fruit of these investments."

"The process of privatisation, which now is close to the end, also contributed a lot to the development of the economy.

"On top of all this we should note the strict fiscal policy, which helped to stabilize the situation after the Russian crisis and gave confidence," she said.

Lithuania had GDP growth of 6.7 percent last year, with the economy growing 8.1 percent in the first nine months of the year according to preliminary figures.

Unemployment in September dropped to 9.3 percent of the workforce, the lowest in four years.

Consumer prices dropped by 1.9 percent over eight months, after one percent deflation in 2002, while industrial production increased by 15 percent over the first nine months of the year, compared to the same period of 2002.

There was similar good news for Latvia and Estonia.

The European Commission forecast the Latvian economy would grow six percent growth this year, 5.2 percent next year and 5.7 percent in 2005, while Estonia would see growth of 4.4 percent in 2003, 5.6 percent in 2004 and 5.1 percent in 2005.

"These figures are very bright for Latvia and all Baltic states. Potential of growth is very high," Raita Karnite, a director of the Institute of Economics at the Latvian Academy of Sciences said.

"A key reason is the balanced economic policy that is friendly to the entrepreneurs," Andres Saarniit, head of the economics policy department of the Bank of Estonia told AFP.

"The budgetary policy of the Baltic states is still significantly more balanced than the average in the 10 accession countries," he said.

"By forecasting a relatively quick GDP growth in the coming years for the Baltic states, the European Commission is evidently counting on the continuation of the current economic policies in the Baltic region," added Saarniit.

Mario Lambing, chief specialist at the economic development department of the Estonian Economics Ministry pointed out that although the Baltic states have the highest growth rates among the accession countries, they have the lowest GDP rate per person in the group.

"The more developed the country, the slower the growth. Countries in transition like Estonia have a lot of untapped potential. Bridging the gap with more developed countries requires a lot less 'energy' than achieving high growth for the highly developed countries," he said.