Lithuania: Growth remains sturdy in Q4 2019
GDP increased 3.8% in year-on-year terms in Q4 2019, according to detailed national accounts data released by Lithuania’s Statistical Institute on 2 March. This matched both the previous quarter’s result and the preliminary fourth-quarter estimate, thus bringing annual growth for the full year of 2019 up to 3.9% (2018: +3.6% year-on-year). Meanwhile, in seasonally- and working day-adjusted quarter-on-quarter terms, growth accelerated to 1.3% in Q4, from 0.3% in the Q3, marking the strongest expansion since Q4 2018.
The fourth-quarter expansion was chiefly led by sturdy domestic demand. Private consumption growth gained steam in the quarter (Q4: +3.4% yoy; Q3: +3.0% yoy), underpinned by a healthy increase in real wages and a falling unemployment rate. On top of that, public spending rebounded in the final quarter of last year (Q4: +0.9% yoy; Q3: -1.1% yoy), further supporting the overall outturn. That said, fixed investment lost some traction in the quarter (Q4: +5.2% yoy; Q3: +8.2% yoy), amid softening business sentiment and a likely drop in inflows from the EU cohesion funds.
In the external arena, metrics were less upbeat, however. Growth in exports of goods and services nearly halved in the fourth quarter (Q4: +5.6% yoy; Q3: +10.8% yoy) against the backdrop of increasingly subdued global economic environment. Meanwhile, imports growth decelerated markedly in the same quarter (Q4: +3.4% yoy; Q3: +9.4% yoy), likely reflecting faltering capital inflows.
Looking ahead, growth is seen slowing sharply this year, amid rising headwinds both at home and abroad. Domestic demand is set to soften as cooling wage growth and increasing labor shortages will likely eat into household spending growth, while slowing inflows of EU funds are seen denting investment activity. Meanwhile, a deteriorating external environment bodes ill for the country’s exports.