Lithuania Politics October 2020

Lithuania

Lithuania: Center-right opposition wins parliamentary elections, boding well for economic outlook

October 26, 2020

In the parliamentary elections held on 11 and 25 October, the opposition Homeland Union party (the Conservatives) won the majority of the vote. The Conservatives, led by former Finance Minister, Ingrida Šimonyte, are set to form a center-right coalition with two liberal parties and face the challenge of navigating the country through the Covid-19 pandemic and the related economic fallout. That said, the Conservatives’ solid economic credentials and the need for coalition-building hint at the continuity of key economic and social policies ahead.

According to preliminary results, the Conservatives secured 50 seats in the 141-seat parliament, staging a strong comeback after eight years in opposition. This, together with 13 seats won by the Liberal Movement and 11 seats won by the new Freedom Party, gives the prospective coalition of three parties—all led by women—a slim majority in parliament. Šimonyte is widely expected to become the head of the new government, with its priorities largely focused on overcoming the heath crisis, modernizing the economy and reducing economic and educational disparities between urban and rural areas. The Conservatives’ strong economic track record— Šimonyte led the government’s austerity drive to stabilize public finances between 2009 and 2012—and progressive policy agendas presented by the two liberal parties, signal the continuation of most economic and social reforms.

The election result comes against the backdrop of heightened uncertainty due to the Covid-19 pandemic. That said, Lithuania’s economy has so far proven to be relatively resilient to the crisis and is expected to contract at the softest pace in the EU this year. This, coupled with the Conservatives’ reinvented program, which focuses more on investment and welfare than austerity, bodes well for the business climate and domestic demand ahead. The country’s ongoing integration with the EU and NATO is also set to continue, although geopolitical tensions with Russia amid political upheaval in Belarus cloud the outlook somewhat.

FocusEconomics panelists see GDP rebounding 3.8% in 2020, which is down 0.3 percentage points from last month’s forecast. For 2021, our panel sees growth at 3.3%.


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Lithuania GDP Q2  20 20 1

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


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