Amid rising inflation, the economies of Lithuania and other countries in the world may grow slower than earlier thought, according to the latest assessment by the International Monetary Fund (IMF).
The IMF expects Lithuania’s GDP to grow by 1.8% this year and by 1.1% in 2023.
While the forecast for 2022 remains unchanged from the one in April, the estimate for next year has been cut by 1.5%, more than halving it.
The slower growth will be mainly due to slowing consumption, which is negatively affected by the declining purchasing power of the population due to inflation. Another important factor is the slowdown in major euro area economies, which is reducing demand for Lithuanian exports.
Average annual inflation in Lithuania is expected to reach 17.6% this year. According to the IMF’s assessment, price growth, which peaked in the autumn, is expected to moderate next year, with average annual inflation falling to 8.4%.
According to Gediminas Simkus, chairman of the Bank of Lithuania, who is attending the IMF’s annual meetings in Washington, the current economic environment requires a swift and coordinated response by central banks, governments and international financial institutions.
“With inflation on the rise, driven mainly by the exogenous supply shock caused by Russia’s war on Ukraine and the energy and political blackmail against the rest of the world, it is important that aid measures reach the most vulnerable countries, populations and businesses quickly,” he is quoted in a press release from the Bank of Lithuania.
“This will put pressure on governments to subsidise increased costs, but from a monetary policy perspective, it is important that state aid is as targeted as possible, aimed at only the most vulnerable social groups and economic activities to ensure that price signals and the competitive environment in the economy are not distorted,” Simkus added. (LRT/Business World Magazine)
