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Lithuania GDP is projected to stagnate in 2023 and rebound to 2.6% in 2024. High inflation will continue to weigh on private consumption. A weak outlook for global trade, uncertainty and geopolitical tensions affecting key trading partners will contribute to a sharp slowdown in exports. Inflation will start to ease with lower import prices for gas and oil. Public investment, strengthened by EU funds, will support growth. Unemployment is projected to increase slightly in the near term but wage growth is likely to remain robust due to labour shortages. Fiscal policy support has helped households and firms with elevated energy costs. Support measures should become increasingly targeted on those not sufficiently protected by the general social protection system. Improving the quality of compulsory education would help to reduce skill-mismatches, while better management of state-owned enterprises would support productivity. Complementing emission reduction efforts with a carbon tax would both reduce the dependency on oil and gas imports and support the green transition. The economy is slowing in face of headwinds Economic activity slowed in the second half of 2022, as the impact of increasing inflation, uncertainty from geopolitical tensions, rising interest rates and deteriorating business confidence began to materialise. GDP declined by 2% in the first quarter of 2023 relative to the final quarter of 2022. Headline inflation stood at 13.3% in April 2023. Business confidence fell throughout 2022 and was again negative in the early months of 2023. Manufacturing production recorded a 8% contraction in February 2023 and retail sales contracted in the first three months of 2023. Unemployment has increased slightly but remains below the long-term average, wage growth remains robust and labour costs are rising.
Lithuania
Source: Eurostat, Business Confidence Indicators; and OECD, Consumer Prices database. StatLink 2 https://stat.link/wlv8qd
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023