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Lithuania GDP Q3 2020

Lithuania: GDP dips only slightly in Q3, pointing to healthy recovery

GDP dipped 0.1% year-on-year in the third quarter, according to preliminary data released by Statistics Lithuania on 30 October. The result reflected a significant improvement from the second quarter’s revised 4.6% plunge (previously reported: -4.2% yoy), which had marked the sharpest contraction since Q4 2009. Meanwhile, in seasonally-adjusted quarter-on-quarter terms, GDP rebounded and increased 3.7% in Q3, contrasting Q2’s 5.9% dive (previously reported: -5.5% s.a. qoq) and marking the best result on record.

Q3’s recovery was spurred by the removal of most Covid-19-related restrictions and social distancing measures in June, which boosted consumer demand and economic activity in Q3, as reflected in healthier retail sales and industrial output data. Although a breakdown by expenditure has not yet been released, Q3’s reading seems to have been spearheaded by recovering domestic demand, while the external sector was still reeling from eviscerated foreign demand, disrupted global supply chains and severely reduced tourist inflows.

Q3’s result signals that the economy remains resilient and should record one of the softest contractions in the EU this year. That said, a growing number of new Covid-19 cases and the recent reintroduction of some social distancing measures threatens to derail the recovery in Q4—a challenge that the newly elected center-right government will have to address immediately after taking office. That said, GDP is set to rebound next year, supported by a revival in foreign and domestic demand, and inflows of EU funding. The new government’s progressive economic program also bodes well for the economy in the medium term.

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