Lithuania: GDP rebounds in Q3, pointing to healthy recovery
According to a second estimate released on 1 December, GDP ticked up just 0.1% year-on-year in the third quarter, contrasting the sharp 4.6% contraction tallied in the second quarter. The reading came in above the preliminary estimate, which showed a 0.1% annual contraction. On a seasonally-adjusted quarter-on-quarter basis, activity rebounded and increased 3.8% in Q3 (previously reported: +3.7% s.a. qoq), swinging from the previous quarter’s 5.9% contraction.
The third quarter’s improvement was broad-based and reflected the removal of most Covid-19-related restrictions in June. Private consumption bounced back to growth, increasing 1.2% year-on-year in Q3 and contrasting the 9.3% contraction logged in Q2. In addition, fixed investment contracted at a markedly slower pace of 1.7% in Q3, compared to the 10.6% decrease seen in the prior quarter. Public spending, meanwhile, recorded zero growth in Q3, unchanged from the previous quarter.
On the external front, exports of goods and services bounced back, growing 1.6% in Q3 (Q2: -11.3% yoy), pointing to a recovery in foreign demand. In addition, imports of goods and services declined at a much slower rate of 1.8% in Q3 (Q2: -18.2% yoy).
The second estimate confirmed that Lithuania’s economy fared relatively well in Q3 and should record one of the softest contractions in the EU this year. That said, a massive surge in new Covid-19 cases and the reintroduction of social distancing measures bode ill for the recovery in the fourth quarter, with activity likely to slip back into contraction at the tail end of the year.
However, GDP is set to rebound next year, supported by a revival in foreign and domestic demand, and rising inflows of EU funding. Meanwhile, the new center-right government’s economic program bodes well for the economy in the medium term.