2025-06-12
Lietuvos bankas’ projection: economic growth increasingly supported by high value-added manufacturing and services
Lithuania’s economy continues to demonstrate resilience to trade tariff shocks. High value-added manufacturing and information and communication technology services are becoming major drivers of growth. A brief spike in inflation, which dampened both household purchasing power and consumption growth, prevented Lithuania’s economy from growing even more rapidly
“Global economy developments caused by the turmoil over trade policy disputes have not yet brought Lithuania’s economic growth to a halt – we are still on the upward trajectory. We understand that Lithuania is not isolated in these turbulent times, but we have reason to believe that the strengths of our economy will allow us to maintain a slightly slower yet still sufficiently strong pace of growth over the next three years,” says Gediminas Šimkus, Chair of the Board of Lietuvos bankas.
According to Lietuvos bankas’ projections, this year Lithuania’s gross domestic product (GDP) will grow by 2.8%, which is 0.1 percentage points less than projected in March. The economy is also expected to grow by 2.8% in 2026 and by 2.9% in 2027.
These projections do not include a possible increase in US trade tariffs in July this year. If, from July, the tariffs applied to the European Union (EU) were to increase by a total of 20 percentage points, Lithuania’s economic growth over the next three years would be about 0.4 percentage points slower than it would have been if US tariffs had not been changed this year (tariffs would be applied at the 2024 rate).
Lithuania’s economy continues to be driven by manufacturing, with manufacturers of modern chemical products, optical products, and computers playing an increasingly important role. This structural development, which has been observed for more than a quarter, confirms that Lithuanian businesses are capable of adapting and growing even in volatile conditions.
The information and communication technology sector has become one of the fastest growing sectors of the economy. The sector, which was considered niche just a short while ago, has significantly expanded its scope of activities and currently generates nearly 6% of GDP. Enterprises in this sector are boldly joining global supply chains, with their service exports already accounting for more than 3% of GDP.
Total Lithuanian exports are expected to expand by 3.3% this year and by 2.7% and 3.5% in 2026 and 2027, respectively. Over the projection horizon, exports are expected to grow at less than half the pace compared with the past decade, mainly due to the geopolitical situation, uncertainty, and the introduction of trade tariffs, which will result in lower demand for goods and services produced in Lithuania.
The slower growth of exports of goods and services should be offset by relatively robust domestic demand, with both investment and household consumption expected to grow over the projection horizon.
Investments, which dropped by just over 1% last year, are projected to recover this year and go up by 6.9%. Investments are stimulated by continuing substantial inflows from EU support funds and easing monetary policy. Investment volumes are expected to grow by 5.2% in 2026 and by 3.5% in 2027.
Households will also have considerable capacity to increase consumption due to the relatively rapid growth of purchasing power and good financial position. Private consumption is projected to grow by 3.8% in 2025 and by 4.0% and 3.7% in 2026 and 2027, respectively.
The situation in the labour market remains fairly stable, with little change in the unemployment rate, though it is higher than before the onset of the period of slower economic growth in 2022. The unemployment rate, which rose to 7.1% last year, is projected to fall to 6.7% this year and continue to decline slowly in subsequent years.
Average wages, which rose by 10.4% last year, are expected to increase by 8.7% in 2025. In 2026, wage growth will slow down to 8.3% and to 7.7% in 2027. Despite the projected slowdown in wage growth, wages will continue to increase at a more rapid pace than before the turmoil of the past few years.
Average annual inflation is projected to reach 3.3% this year and return to the normal level typical of the Western economies’ standards of living next year. Inflation is expected to stand at 2.5% in 2026 and 2.6% in 2026.
Further information on the projected economic development can be found on the website of Lietuvos bankas.