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Economy and Finance

Economic forecast for Lithuania

The latest macroeconomic forecast for Lithuania. 

Indicators 2023 2024 2025
GDP growth (%. yoy) -0.3 2.1 3.0
Inflation (%. yoy) 8.7 2.4 2.4

Real GDP is estimated to have contracted by 0.3% in 2023, slightly less than expected in autumn. After a negative first quarter, real GDP strongly rebounded in the second quarter, before stagnating in the second half of the year. Despite significant capital investments and a fast deceleration of inflation, the economic recovery was delayed due to subdued private consumption, weak exports and tightening financing conditions. Exports of goods, in particular in the chemical, plastic, wood and furniture sectors, continued to be impacted by sluggish global demand, while exports in services recovered. The labour market remained resilient, with unemployment on a downward trend and growing employment figures thanks to an increasing number of self-employed and persons fleeing war in Ukraine. Wage growth remained strong, driven by higher minimum wages and public sector wage increases, but also due to a persistently tight labour market.

While recent manufacturing, construction and services confidence indicators show rather pessimistic expectations for the near future, consumer confidence started to improve. Private consumption is expected to grow thanks to alleviating price pressures, although uncertainty over Russia’s war of aggression in Ukraine is still expected to weigh on private consumption, as consumers opt for precautionary savings instead. At the same time, continuously weak external demand is limiting growth, which is forecasted at 2.1% in 2024. For 2025, GDP growth is projected to strengthen to 3%, as exports are recovering, and private consumption and investments are expected to become the key growth drivers.   

After reaching a record-high of 18.9% in 2022, HICP inflation moderated to 8.7% in 2023, as growth in prices of energy turned negative in the second half of 2023, while the price of food and manufacturing products continued to decelerate. For 2024-25, HICP inflation is forecast to come down faster than projected in the Autumn Forecast, mainly due to a stronger-than-expected decline in energy prices. HICP inflation is projected to remain slightly above the 2% target, at 2.4%, over the forecast horizon. Inflation excluding energy and food should come down as well, albeit somewhat slower than headline inflation. Wage growth is expected to slow down from the double-digit growth of 2023, but to remain significant due to the tight labour market and expected minimum wage increases.