The European Commission predicts that Lithuania's gross domestic product (GDP) will contract by 7.9 percent this year due to the Covid-19 pandemic.
However, the country’s economy should rebound and grow 7.4 percent next year, the Commission said in its Spring 2020 Economic Forecast.
According to the Commission, the heaviest blow to Lithuania’s economy will be dealt in the second quarter of 2020. However, it expects GDP growth to stage a strong rebound in the third quarter.
The country’s exports and imports should decline by 12.5 percent and 12 percent, respectively.
In the short term, export recovery will depend on the economic strength of Lithuania’s Nordic trading partners, the EC says.
Consumer price inflation in Lithuania is expected to slow to 0.8 percent this year amid decreased demand and lower energy prices, before accelerating to 1.5 percent next year.
The unemployment rate is projected to rise by approximately 3 percentage points, to 9.7 percent this year, before going down to 7.9 percent in 2021.
The government's fiscal stimulus plan will push this year's budget deficit to 6.9 percent of GDP. In 2021, however, the ratio is expected to fall to 2.7 percent of GDP.
Meanwhile the EC estimates that Lithuania's debt-to-GDP ratio is set to rise from 36.3 percent in 2019 to about 48.5 percent in 2020. In 2021, the ratio is expected to inch down to 48.4 percent of GDP.
As estimated by the Commission, the eurozone’s GDP will fall by 7.7 percent this year before rebounding by 6.3 percent in 2021. Meanwhile, the European Union’s (EU) economy will contract by 7.4 percent this year and grow 6.1 percent next year.