The International Monetary Fund has slightly upgraded its outlook for Lithuania’s economy, projecting gross domestic product will grow 2.9% this year and 3.4% in 2026, the Bank of Lithuania said Wednesday.
In April, the IMF had forecast growth of 2.8% in 2025 and 2.5% next year.
The fund said Lithuania’s economy is benefiting from European investment and declining interest rates, even as private consumption slowed at the beginning of the year.
“Lithuania’s economy is currently on the rise: people’s purchasing power continues to grow strongly, and economic expansion is expected to accelerate further next year,” Bank of Lithuania Chairman Gediminas Šimkus said in a statement. “But it is important to ensure that this is not just a flash in the pan, but a long-term and sustainable trend.”
The IMF noted that a pension reform, which will allow residents to withdraw up to 40% of their second-pillar savings, is expected to further stimulate consumption next year.
Inflation, unemployment and deficit trends
The IMF lowered its inflation forecast slightly, to 3.2% this year and 2.7% in 2026. Rising consumption, rapid wage growth and upcoming tax changes will continue to drive price increases, it said.
Unemployment is expected to fall to 6.6% this year and 6.1% next year.
At the same time, the fiscal deficit is set to widen as Lithuania ramps up defence spending. The IMF projects the shortfall will reach 2.8% of GDP in 2025 and about 4% in 2026, remaining at similar levels in the medium term. Public debt could rise from 38% of GDP today to 54% within five years.
New and higher taxes taking effect next year are expected to generate additional revenue equal to about 0.6% of GDP, according to the forecast.
Long-term risks
The IMF praised Lithuania’s resilience in a “challenging external environment” but cautioned that long-term risks remain, including weaker demand from export partners, geopolitical tensions and demographic pressures.
It also warned that slowing productivity growth poses risks to competitiveness and sustainable development.
The fund recommended reforms to strengthen labour skills through education and vocational training, smoother immigrant integration, greater digitisation of public services and wider use of artificial intelligence in business. Improving access to finance would also help spur investment, it said.
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