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Economy and Finance

Economic forecast for Lithuania

The latest macroeconomic forecast for Lithuania. 

Before the Russian invasion of Ukraine, the economy of Lithuania benefitted from higher activity in manufacturing, construction and services sectors. With the onset of the war, confidence indicators deteriorated, signalling a weakening of economic activity. Exports to Ukraine, Russia and Belarus started declining, partly offset by increased exports to other countries. Despite higher uncertainty, so far the labour market impact has been small, with employment growing gradually and nominal wages rising at an elevated pace.

Last update : Summer 2022 Economic Forecast (14/07/2022)

GDP growth (%, yoy)-0,15,01,92,5
Inflation (%, yoy)1,14,617,05,1

The Lithuanian economy, which grew by 5.0% in 2021, is expected to expand by 1.9% in 2022, a moderate upward revision from the 1.7% forecast in spring, owing to a better than expected performance of exports in the first quarter, and by 2.5% in 2023. Economic activity is expected to be dampened by weaker exports (primarily to Ukraine, Russia and Belarus), continuing uncertainty over the geopolitical situation in Eastern Europe, lasting tensions affecting the relationship with China, and the projected fall in real household income in 2022 that has already started hampering private consumption. These factors are also set to take a toll on investment, which, in addition, will be impacted by intermediate product price inflation and delays in the delivery of needed inputs.

Inflation remains elevated and continues rising. It is projected at 17.0% in 2022, the biggest rise in prices since 1996. The sizeable upward revision from the Spring Forecast of 12.5% is mostly attributable to prices of energy and non-energy industrial goods and processed food. One third of the inflation is determined by energy prices, which are projected to increase by roughly 50% this year despite containment measures undertaken by authorities. Higher energy costs and supply disruptions are also driving up the prices of food and non-energy industrial goods. Prices of tradables, however, are increasing considerably more in Lithuania than on average in the EU, possibly indicating the role played by robust demand and surging labour costs in shaping price developments. The slowdown in economic growth, however, is anticipated to limit the rise in labour costs and reduce the price pressures induced by demand. In addition, global energy prices are expected to weaken gradually in the medium term. As a result, inflation is projected to moderate over the forecast horizon, reaching 5.1% in 2023, though staying higher than previously expected.