(Adds quotes from PM, details)
By Nerijus Adomaitis
VILNIUS, April 28 (Reuters) - Lithuania's economy contracted by 12.6 percent in the first quarter year-on-year, the worst since 1995, the statistics office said on Tuesday, but the prime minister hoped for improvements in the coming years.
The figure confirmed a rapidly accelerating slowdown in the Baltic region, after several years of strong growth.
The median forecast in a Reuters survey was for a gross domestic product (GDP) drop of 8.4 percent in the first quarter after a fall of 2.2 percent in the final quarter of 2008.
"We see that this year will be difficult," Prime Minister Andrius Kubilius told Reuters Financial Television.
"We hope that next year we shall have a much lower GDP decrease (than this year) or even stability in GDP, and then we are forecasting that we should return back to GDP growth in 2011," he said.
The recession in Lithuania, Latvia and Estonia has created
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"It's a brutal change from the last quarter of 2008 ... We are seeing the darkest period of the night, but I would not exclude that the drop in the second quarter could be similar or even worse," said SEB chief economist Gitanas Nauseda.
"Still, our main scenario is that the economy should see stabilisation in the second half of the year, and that would depend a lot on the recovery of the global financial markets."
On a quarterly basis, GDP slid 9.5 percent in the first quarter after a 1.4 percent drop in the previous three months.
The statistics office said the first quarter fall was due to a drop in industry, where output dropped 17.9 percent year-on-year in March, a decade low, after an annual drop of 15.3 percent in February.
Retail sales plunged 30.8 percent year-on-year in March after a drop of 32 percent in the previous month.
Neighbouring Latvia, which last year had to take a 7.5 billion euro bailout led by the International Monetary Fund (IMF), has so far led the Baltic slowdown.
It had a 10.3 percent GDP drop in the last year of 2008, while Estonia contracted by 9.7 percent.
Kubilius repeated that he did not exclude asking for help from the IMF, but it was not needed at the moment.
He said the government was going to adjust spending in line with revenue falls. (Reporting by Nerijus Adomaitis; Editing by Victoria Main)