Lithuania: Economic growth eases further in the third quarter
November 30, 2016
The Lithuanian economy expanded 1.7% in annual terms in Q3, according to detailed data released by the National Statistics Office on 30 November. The result matched the preliminary estimate and represented a slight deceleration from the 1.9% increase seen in the second quarter. A disappointing grain harvest weighed heavily on the agricultural sector, while fixed investment in the Baltic country was the biggest drag on growth on the back of sluggish inflows of EU funds.
The domestic sector provided the largest contribution to growth for yet another quarter. Household consumption, strongly supported by a steady increase in wages and low unemployment levels, rose 5.7% in Q3 (Q2: +6.5% year-on-year). Growth in government consumption, after slowing notably to 0.7% in Q2, partly recovered lost ground and increased 1.2% in Q3. Conversely, fixed investment plunged in the third quarter after expanding 2.6% in the second quarter. Against a backdrop of dwindling investment in the public sector and several postponements in EU-funded projects, fixed investment contracted 5.1%.
On the external side of the economy, lower outflows of refined oil products and agricultural products were behind a deceleration in the exports of goods and services, which only managed to expand a tepid 1.2% in the third quarter, down from the 1.5% increase seen in the second quarter. Imports also eased and recorded a 1.1% rise in Q3 (Q2: +1.5% yoy). As a result, the net contribution of the external sector to overall growth rose slightly from minus 0.1 percentage points in the second quarter to plus 0.1 percentage points in the third quarter.
On a quarter-on-quarter basis, GDP grew a seasonally- and working-day adjusted 0.1% in Q3, which marked a deterioration from the 0.4% expansion seen in Q2 and the lowest reading since June 2012.
Author: David Ampudia, Economist