Lithuania's economic contraction this year will be the smallest one in Europe, according to the International Monetary Fund (IMF).
Overall, the world economy will have weathered the Covid-19 pandemic better than initially feared, the IMF estimates, mostly thanks to extensive stimulus packages passed by governments and monetary easing.
“Even though the latest forecasts are less gloomy than they were at the beginning of the pandemic, the road to recovery will be long and bumpy,” Vitas Vasiliauskas, the chief of the Bank of Lithuania, said in a press release.
“It is important not to stop economic stimulus prematurely. However, we have to do it responsibly and direct funds towards measures for sustainable long-term growth, such as digitisation of the economy and the green course,” he continued.
According to IMF projections quoted by the Bank of Lithuania, the country's economy will contract 1.8 percent this year, before growing 4.1 percent in 2021. In its previous report in June, the IMF expected Lithuania's GDP to fall 8.1 percent.
Meanwhile the IMF expects the world economy to shrink 4.4 percent this year, with China the only major economy to expand (1.9 percent).
Eurozone countries, Lithuania's main export markets, will experience a combined contraction of 8.3 percent – 1.9-point smaller than estimated in June – before growing 5.2 percent next year, the IMF believes.
At the beginning of the pandemic, the Lithuanian government raised its borrowing limit to respond to the economic challenges of the pandemic. In May, it unveiled a 6.3-billion-euro stimulus plan that includes national and European funds.