The European Commission predicts that Lithuania’s gross domestic product (GDP) will contract by 7.9% this year due to the Covid-19 pandemic.
However, the country’s economy should rebound and grow by 7.4% next year, the Commission said in its Spring 2020 Economic Forecast.
According to the Commission, the heaviest blow to Lithuania’s economy will be dealt in the second quarter. However, it expects GDP growth to stage a strong rebound in the third quarter.
The country’s exports and imports should decline by 12.5% and by 12%, respectively.
In the short term, export recovery will depend on the economic strength of Lithuania’s Nordic trading partners, the EC says.
Consumer price inflation in Lithuania is expected to slow to 0.8% this year amid decreased demand and lower energy prices, before accelerating to 1.5% next year.
The unemployment rate is projected to rise by approximately 3%, to 9.7% this year, before going down to 7.9% in 2021.
The government’s fiscal stimulus plan will push this year’s budget deficit to 6.9% of GDP. In 2021, however, the ratio is expected to fall to 2.7% of GDP.
Meanwhile the EC estimates that Lithuania’s debt-to-GDP ratio is set to rise from 36.3% in 2019 to about 48.5% in 2020. In 2021, the ratio is expected to inch down to 48.4% of GDP. (LRT/Business World Magazine)