Lithuania GDP Q3 2017

Lithuania

Lithuania: Revised data confirms growth decelerated in Q3

December 1, 2017

According to detailed data released by the Statistical Institute on 1 December, GDP expanded 3.1% year-on-year in Q3 (Q2: +4.1% year-on-year), confirming the preliminary figure released in November. Although a robust expansion in exports and a jump in fixed investment underpinned growth in Q3, a marked slowdown in private consumption together with surging investment-related imports dragged on the overall figure.

Fixed investment jumped 7.5% in Q3 compared to the same quarter last year, a notable acceleration from Q2’s 3.1% rise. Investment growth was boosted by stronger inflows from the EU Structural and Cohesion Fund and low interest rates. Household consumption growth, meanwhile, slowed considerably in Q3 compared to Q2, coming in at 2.4% versus 4.3%, respectively. This slowdown likely reflected the effects of rising inflation. Government consumption growth also moderated to 1.4%, down from 1.9% in Q2.

On the external front, exports of goods and services climbed 13.0% in Q3 compared to the same quarter of the previous year. However, this was slightly down from the 13.9% year-on-year growth recorded in Q2. The expansion in exports was supported by strong growth in manufacturing exports, which benefited from robust demand from Europe and soaring overseas orders from CIS countries. Imports grew 13.1% in Q3 (Q2: +10.8% yoy), driven by the jump in fixed investment. Accordingly, the external sector’s contribution to growth swung from plus 2.0 percentage points in Q2 to minus 0.2 percentage points in Q3.

On a quarter-on-quarter basis, GDP grew a seasonally- and working-day adjusted 0.1% in Q3, down from the 0.6% increase recorded in Q2 and marking the third consecutive quarter of decelerating growth.

Growth is set to stay robust next year, supported by strong inflows of EU funds and FDI. Moreover, rising wages and widening credit should support household. However, if rising welfare and labor costs are not reigned in through labor market and pension reforms, the country could lose competitiveness, which would restrain growth.

The Central Bank expects GDP to grow 2.8% in 2018. FocusEconomics Consensus Forecast panelists see the economy growing 3.3% in 2018 which is unchanged from last month’s estimate. In 2019, the panel expects GDP to expand 2.9%.


Author: Massimo Bassetti, Economist

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Lithuania GDP Q3 2017

Note: Year-on-year changes of GDP in %.
Source: Statistics Lithuania and FocusEconomics Consensus Forecast.


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