The Lithuanian Finance Ministry has kept the country’s annual GDP growth forecast for 2022 unchanged at 1.6% despite slower growth in the second half of the year.
The ministry has also revised its GDP growth forecast for 2023 to 1.4%, down from its earlier estimate of 2.1%, according to the latest macroeconomic projections published on September 12.
However, “in case of unfavourable circumstances, there is a risk of Lithuania’s GDP change in 2023 being at least around 2% lower” than projected in the scenario, the ministry said in a press release.
“In the face of war and energy price shocks, the Lithuanian economy is showing resilience and is expected to grow, albeit at a slightly slower pace, both this year and next,” said Finance Minister Gintare Skaiste.
“The labour market situation remains stable – the unemployment rate will continue to fall, and wage growth will remain robust this year,” she added.
The updated economic development scenario for 2022-2025, which the ministry says “has been prepared under conditions of very high uncertainty”, expects the unemployment rate to fall to 6.3% this year before edging up to 6.8% next year.
The ministry has raised its annual inflation estimate for 2022 to 17.8% from 15.8% previously, but expects it to decelerate to 6% in 2023.
High energy commodity prices, which are affected by the war in Ukraine, will remain the main driver of inflation. The rate of inflation is expected to approach 2% in 2024 and 2025, if energy commodity prices remain stable, according to the ministry.
Wage growth is projected to reach 12% this year, down from the previous estimate of 13.2%, and fall to 8.1% in 2023.
Lithuanian exports of goods and services are forecast to grow by around 3% this year, slightly up from the 2.5% estimate in June, and by some 3.1% on average in 2023-2025.
“The extent of the negative economic consequences for Lithuania will depend on how long the military action in Ukraine lasts and how well EU countries manage to cope with challenges in the energy sector,” the ministry said.
Challenges from new Covid-19 variants also remain among the negative risk factors, it added. (LRT/Business World Magazine)
