Flash comment: Lithuania - March 1, 2017
Strong household consumption and recovering investment

According to revised GDP figures, the Lithuanian economy grew more rapidly in the fourth quarter of last year and in 2016 than previously estimated. The annual real GDP growth accelerated to 3.2% in the fourth quarter of last year (prev. 3%), while GDP increased by 2.3% in 2016 (prev. 2.2%).


Household consumption continued to contribute most to GDP growth. Last yar household consumption demonstrated the most rapid growth since 2007, as it increased by 5.6%, in real terms. It was supported by continued improvement in the labour market, robust and broad-based wage growth, as well as by an accelerating growth of the household loan portfolio.


Although the annual real growth of investment accelerated to 5.7% in the fourth quarter of 2016, it did not manage to drag the investment growth out of the negative territory for the whole last year. Shrinking inventories contributed negatively to GDP growth throughout the whole year.

In real terms, exports of goods and services increased by 2.9% last year. Exports of goods were negatively affected by bad harvests and thus shrinking exports of grain and oil seeds. Meanwhile, exports of services surprised on the upside last year. The imports of goods and services increased by 2.6% last year.

Outlook: growth will pick up before easing

We expect economic growth to accelerate to 2.8% this year, before easing to 2.5% in 2018. Even though growth in exports and investments is expected to pick up this year, household consumption will remain the main driver of growth. However, growth in household consumption will ease as real wage bill growth subsides. Investment growth will strengthen thanks mainly to rising public investments, but also due to faster distribution of EU funds.

 


For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt

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