G. Skaistė: "This year economic growth will be faster than previously forecast"
Given the acceleration in economic activity observed at the beginning of the year, this year the Lithuanian economy will grow faster than projected in June, by 2.3 %. The rapid decline in inflation will continue, with price growth slowing to 1 % in 2024. Wages, meanwhile, will grow by an average of 10.1 % and continue to strengthen the purchasing power of the population. This is foreseen in the updated Economic Development Scenario of the Ministry of Finance.
“Lithuania’s economic recovery is gaining momentum, and growth is expected to strengthen further next year as external demand recovers. The updated projections point to positive trends, with the country's economy growing faster than expected in June this year and inflation slowing more markedly. With the labour market remaining relatively resilient, the average wages will grow at a double-digit rate this year. This will lead to a further increase in the purchasing power of the population and encourage domestic consumption,” Minister of Finance Gintarė Skaistė says.
The Economic Development Scenario prepared by the Ministry of Finance projects that after sufficiently good results in the first half of this year, in 2024 Lithuania's gross domestic product (GDP) will grow faster than expected in June, with a growth rate of 2.3 %. Growth rates are expected to accelerate to 2.9 % per year on average in 2025 – 2027.
The number of employed persons in the country grew by 2.3 % in the first half of this year, while the labour supply increased by 3.1 %. With economic activity recovering, strong demand for labour and an increase in labour supply, the number of employed persons is expected to increase by 1.4 % in 2024. The unemployment rate is expected to reach 7.3 % this year and to gradually decline over the medium term.
The scenario projects that in 2024 the growth of the average gross monthly wages will remain strong enough to reach 10.1 %. The growth rate of average gross monthly wages is expected to reach 7.6 % next year.
Inflation remained low in the first half of the year. In 2024, the inflation rate is expected to decline slightly faster than expected in June, with an average annual inflation rate of 1 %. Lower inflation will be driven by more consumer-friendly food price developments, reduced pressures on the prices of non-energy industrial goods, as well as faster deflation of energy goods and more moderate service inflation. In the following medium-term years, inflation is expected to remain close to 2.5 %.
In a context of rising household disposable income and low inflation, the purchasing power of the population will continue to strengthen. Household consumption expenditure is expected to grow by 3.3 % this year and to accelerate to 3.6 % next year. In the following medium-term years, as the financial situation of the population continues to improve, household consumption expenditure could grow by more than 3 % annually.
Expenditure on gross fixed capital formation (GFCF) is expected to grow moderately this year, by 1.1 %. In the following medium-term years, the growth rate of GFCF expenditure could accelerate to 5.6 % per year on average as the financial situation of enterprises improves, external and domestic demand grows faster, investment in national security increases and the need to invest in green technologies and labour productivity-enhancing measures increases.
The scenario foresees an annual change in exports of goods and services (at constant prices) of 1.2 % in 2024. The annual growth rate of this indicator could accelerate to 3.9 % – 4.2 % in 2025 – 2027 due to more favourable economic developments of the main trading partners.
The scenario is set against the backdrop of exceptionally high external environmental instability and economic uncertainty, ongoing active military actions in Ukraine and geopolitical tensions and changes in monetary policy.
russia's war against Ukraine, geopolitical tensions in the Middle East, excessive tightening of monetary policy, faster growth of energy and other raw materials, food prices, less favourable development of the euro area and the global economy, fluctuations in global financial markets, population ageing and lack of workers are some of the negative risk factors, which may lead to changes in the estimates of key indicators in this scenario.
There are also positive risks, such as stronger domestic and foreign demand, increased investment in defence, faster implementation of the European Green Deal and other EU-funded projects, more favourable demographic trends and immigration of skilled workers, faster transition to green energy.
The description of Lithuania’s Economic Development Scenario (September 2024) is available here.
Full Economic Development Scenario for 2024–2027 is available here.
Presentation is available here.
Additional information:
The Economic Development Scenario was prepared after evaluating the data of the National Accounts for the first half of 2024 and other statistical data published by 2 September 2024, taking into account changes in the external environment that took place after the publication of the scenario by the Ministry of Finance in June 2024 and other information. The assumptions of the scenario regarding the external environment and energy (oil and natural gas) prices are in line with the economic projections and information on futures prices published by the European Central Bank in June this year and by the International Monetary Fund in July 2024.
Last updated: 16-09-2024
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