Lithuania’s economy is expected to continue growing over the forecast horizon, supported by private consumption, which will be driven by increasing real wages and the release of the second- pillar pensions. Real GDP is projected to grow by 3.0% in 2026 and 2.1% in 2027. Despite geopolitical uncertainty, investment is also expected to grow by 5.8% in 2026, and 4.5% in 2027. Inflation is expected to rise to 4.4% in 2026 driven by energy and services prices, before easing to 2.7% in 2027 as energy prices are set to moderate. The general government deficit is projected to increase from 1.8% in 2025, to 2.2% in 2026, and to 2.7% in 2027, mainly due to the projected increase in expenditure related to national investments, social benefits, and interest payments.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 2.9 | 3.0 | 2.1 |
| Inflation (%, yoy) | 3.4 | 4.4 | 2.7 |
| Unemployment (%) | 6.9 | 6.7 | 6.7 |
| General government balance (% of GDP) | -1.8 | -2.2 | -2.7 |
| Gross public debt (% of GDP) | 39.5 | 44.6 | 48.4 |
| Current account balance (% of GDP) | 1.6 | -0.6 | -0.3 |
Economic activity to continue growing
In 2026, private consumption is expected to be the main driver of GDP growth, expanding by 4.6% due to strong real wage growth and the pension reform. The reform, which makes the second pillar pension voluntary and allows withdrawal of accumulated funds, gives a temporary boost to private consumption. With real wage growth expected to continue in 2027, consumption growth is projected to slow but remain positive, at 2.2%. The savings rate is expected to remain high at 8.2% in 2026 and 8.9% in 2027. Investment is forecast to increase strongly, by 5.8% in 2026 and 4.5% in 2027, stimulated by low interest rates and increased public investment. Export growth is expected to be weaker than in 2025, due to lower demand from the main trading partners. At the same time, imports continue to outpace exports in 2026 because of strong domestic demand for imported goods. In 2027, the contribution of net exports to growth is close to zero. Overall, real GDP is projected at 3.0% in 2026 and 2.1% in 2027.
Labour market set to gradually tighten
The expansion of the labour force seen between 2022 and 2024, largely due to the inflow of Ukrainian refugees, stopped in 2025, and is expected to reverse in 2026 (-0.3%) and 2027 (-0.2%), as natural population decline resumes. In 2026 and 2027, the unemployment rate is expected to decline to 6.7%, supported by economic growth and a contracting labour force. The 11.1% increase in minimum wages in 2026, combined with persistent labour shortages amid skills mismatches, is expected to support wage growth, projected at 7.1% in 2026 and 5.9% in 2027.
Inflation expected to rise due to energy price developments
HICP inflation is expected to increase to 4.4% in 2026, up from 3.4% in 2025, following a jump in energy prices due to the conflict in the Middle East. Food prices are expected to increase because of higher fuel, transport and fertilisers costs. Services inflation is also set to increase, projected at 5.9% in 2026 and 4.6% in 2027, reflecting strong wage growth. Non-energy goods prices are expected to increase at the lower rate of 1.2% in 2026 and 1.3% in 2027. Energy prices are set to decline in 2027, due to lower oil and gas price assumptions, while the postponement of the ETS2 implementation to 2028 removed a source of upward price pressure. Overall HICP inflation in 2027 is expected to be 2.7%.
General government deficit set to increase
In 2025, the general government deficit increased to 1.8% of GDP, up from 1.3% in 2024, mainly due to higher social spending and increases in public wages.
In 2026, the deficit is projected to increase to 2.2% of GDP, as government expenditure grows by 1.4 pps, while revenue increases at a slower pace, by 1.0 pp. The widening deficit is primarily driven by higher expenditure related to national investments, social spending, and interest payments. The revenue increase is supported by higher excise duties on fossil fuels, the abolition of the VAT exemption for central heating and hot water supply, the introduction of a security contribution, the increase in the corporate income tax rate, and the increase of excise rates on tobacco products and electronic cigarettes. As of the forecast cut-off date, Lithuania has also adopted a temporary two-month reduction in excise duties on diesel fuel in response to the energy price shock, with a limited fiscal impact of less than 0.1% of GDP.
The deficit is projected at 2.7% of GDP in 2027, with expenditure increasing by 0.4 pp. of GDP, driven mainly by higher spending on defence, social benefits, and interest.
Over the forecast horizon, public debt is expected to increase from 39.5% of GDP in 2025, to 44.6% in 2026 and 48.4% in 2027. Lithuania's public debt increase is driven by significant stock-flow adjustments mainly related to social security fund surpluses which result in asset accumulation rather than debt repayments and the pre-financing of defence expenditure, as well as increasing deficit.