Lithuania: Growth ticks down but remains healthy in Q3
GDP increased 3.7% in year-on-year terms in the third quarter, according to detailed national accounts data released by Lithuania’s Statistical Institute on 29 November. This was slightly down from the second quarter’s 3.8% year-on-year expansion, but was up marginally from the preliminary estimate of a 3.6% increase. Meanwhile, in seasonally- and working day-adjusted quarter-on-quarter terms, growth slumped to 0.2% in the third quarter (previously reported: +0.1 seasonally-adjusted, month-on-month), from 0.9% in the second quarter, marking the weakest expansion in nearly four years.
Sturdy domestic demand remained in the driver’s seat of the overall expansion in the second quarter. Despite moderating slightly, household consumption growth remained healthy (Q3: +2.9% year-on-year; Q2: +3.3% yoy) supported by a tight labor market, rising wages and lower inflation. Furthermore, fixed investment growth edged up in the third quarter (Q3: +8.2% yoy; Q2: +8.0% yoy), amid a favorable business environment and sustained inflows of EU development funds. Meanwhile, government spending lost some traction in the quarter (Q3: +1.1% yoy; Q2: +1.4% yoy), weighing on overall domestic activity growth somewhat.
On the external front, dynamics remained largely positive in the third quarter. Export growth kicked into a higher gear (Q3: +11.7% yoy; Q2: +10.2% yoy), despite faltering trade within the Eurozone and ongoing Brexit-related uncertainty. That said, imports also picked up steam in the quarter (Q3: +12.9% yoy; Q2: +8.7% yoy), likely reflecting capital inflows into the country. As a result, the external sector’s contribution to overall growth remained broadly unchanged in the third quarter.
Looking ahead, growth is seen slowing sharply next year, amid a broad-based downturn. Feebler household spending and slowing investment activity are set to restrain domestic activity, while weaker demand among key trade partners will likely undermine export growth.