Lithuania: Growth ticks up in Q2
August 31, 2018
According to detailed data released by the Statistical Institute on 31 August, the economy expanded 3.8% in annual terms in the second quarter (previously reported: +3.7% year-on-year), a notch above the first quarter’s 3.7%. While the second-quarter acceleration came largely on the back of healthy domestic demand dynamics, the external sector’s contribution to growth remained solid, aided by a deceleration in imports. Overall, the broad-based growth signals solid fundamentals of the gradually maturing economy.
Improved investment and private consumption spearheaded growth in Q2. Fixed investment rose 8.1% on an annual basis in the quarter, a slight deceleration from the 9.1% observed in Q2 but well above the average in the period that followed the 2008 crisis. Household consumption, meanwhile, recorded strong gains in the quarter, expanding 4.5% year-on-year (Q1: +3.0% yoy), bolstered by strong wage growth and a tighter labor market. On a slightly less positive note, government spending growth slowed to 0.4% yoy in Q2, from 0.9% yoy recorded in the first quarter.
On the external front, both exports and imports lost steam in the second quarter as a consequence of the ongoing slowdown in trade in the European Union. Nevertheless, despite the moderation of exports growth to a one-and-a-half-year low of 3.8% in Q2 (Q1: +7.50% yoy), the contribution of the external sector to GDP growth ticked up marginally amid a marked slump in imports growth (Q2: +2.7%; Q1: +6.3% yoy).
On a quarter-on-quarter basis, growth remained stable at 0.9% in seasonally-adjusted terms.
Looking ahead, solid growth is seen carrying over into the second half of this year and into 2019 on the back of strong domestic demand propped up by sustained tightening of labor market conditions, a stabilizing inflationary environment and an uptick in investment activity.
Author: Almanas Stanapedis, Economist