The International Monetary Fund (IMF) forecasts that Lithuania’s GDP will grow by 2.4 percent this year and by 2.6 percent next year.
The IMF’s latest report for Lithuania says that its economic growth will be boosted by real wage growth, public investment and low inflation, the Finance Ministry said.
According to the report, despite geopolitical tensions and the fragmentation of the global economy, Lithuania’s economy is showing resilience. Its economic growth will exceed estimates from the beginning of the year, the inflation shock has been overcome and has not significantly affected the country’s competitiveness in foreign markets.
“Lithuania’s economic recovery is gaining momentum and people’s purchasing power is rising and has already surpassed its pre-war level as inflationary pressures have subsided. With external demand recovering and investment expanding, economic growth should strengthen further in the coming years,” Finance Minister Gintarė Skaistė said in a statement. “These are positive trends, but longer term, we need to continue with structural reforms to increase competitiveness and productivity and to keep Lithuania among the most advanced countries in Western Europe.”
According to the IMF, average annual inflation in Lithuania is expected to be 1.2 percent this year, twice below the euro area average of 2.4 percent.
“Core inflation, however, remains elevated due to high energy pass-through, services inflation and nominal wage growth,” it said in the report.
The IMF kept unchanged its Lithuanian economic forecasts released in June when the fund’s mission concluded its work in Vilnius.
The IMF also forecasts that this year’s general government deficit could be lower than planned in the state budget (2.9%).
The IMF also noted that “Lithuania is facing large spending pressures from defense and higher borrowing costs that add to long-term pressures from aging and climate”.
The IMF said the so-called solidarity levy – windfall profit tax – on banks has not affected their operations and the banking system remains liquid and well capitalised. However, it believes that the levy, extended for another year in June, should not become permanent.
The IMF mission to Lithuania worked for about two weeks from May 24 to June 7.
Newsletter
Every Friday morning.
