2025-03-13
Lietuvos bankas’ projection: Lithuania’s growing economy demonstrates resilience to external shocks
Lithuania’s economy is demonstrating exceptional resilience in the face of a challenging external environment and remains on a growth trajectory. Driven by rapid increase in private consumption and recovering investment, Lithuania’s economy is projected to grow by almost 3% in 2025 and maintain a similar growth rate in 2026 and 2027.
“The ability to adapt effectively to a changing environment and stay the course is a unique feature of Lithuania’s economy. Therefore, even given growing concerns about global economic development and taking into consideration the new risk factors that have emerged only recently, we believe that our economy will continue to grow at a sufficiently fast and sustainable pace. The favourable situation in the labour market will allow us to maintain a rapid growth of wages, which will increase the income of the population and boost domestic consumption,” says Gediminas Šimkus, Chair of the Board of Lietuvos bankas.
Lietuvos bankas has not substantially altered Lithuania’s economic growth projections. Gross domestic product, which grew by 2.7% in 2024, is expected to grow by 2.9% this year and by 3% in 2026 and 2027 (compared to a December projection of 3.1%, 3.1% and 3% respectively).
Overall economic growth has recently been driven mainly by domestic demand, with household consumption picking up, supported more strongly in 2025 by recovering investment.
Private consumption growth, which amounted to 3.7% last year, is projected to accelerate to 4.1% in 2025 and will amount to 3.7% in 2026 and 2027. Rising labour income is the main driver of household consumption growth.
Investment development was less favourable in 2024, investment declined by 1.1%. The fall is due to lower investment in capital goods, in particular transport equipment, as a result of an oversupply of logistics services in Europe.
However, investment is expected to recover already this year, mainly driven by the private sector, which will benefit from the momentum of the Recovery and Resilience Facility (RRF) and projects under the latest EU’s financial framework.
Lietuvos bankas projects that investment will grow by 6.6% in 2025, 5.5% in 2026 and 3.1% in 2027.
Economic growth will also be boosted by recovering exports, which are positively influenced by the preservation of competitiveness and a gradual recovery of demand for Lithuanian goods and services in the markets of major trading partners.
However, foreign demand is recovering slowly, and the growth of Lithuania’s exports is expected to be more modest than before the COVID-19 pandemic. Total exports are expected to grow by 1.6% this year and by 3.6% both in 2026 and 2027.
The situation in the labour market remains favourable for workers. The unemployment rate, which reached 7.2% last year, is expected to fall to 6.8% in 2025, 6.7% in 2026 and 6.6% in 2027. Employment, which rose by 1.7% in 2024, will grow by 0.3% this year but will fall by 0.3% and 0.2% in 2026 and 2027 respectively.
Declining unemployment puts upward pressure on wages, which is why wage growth will continue to be relatively robust. Average wages, after rising by 10.2% last year, are expected to increase by 9.2% in 2025, 8.3% in 2026 and 7.7% in 2027.
Rising labour costs will continue to be one of the main drivers of price increases. Prices for energy and food commodities, tax increases above the 2024 level, such as higher excise duties on alcohol, tobacco, diesel and the introduction of the CO2 tax on energy products, also contribute to price increases.
As a result, average annual inflation is expected to rise temporarily to 3.3% in 2025, before returning to the more familiar level of 2.6% in 2026 and 2027, which is typical of economies that are approaching the living standard in the Western countries.
Further information on the projected economic development can be found on the website of Lietuvos bankas and in the publication “Lithuanian Economic Review”.