GDP in Lithuania

Lithuania - GDP (billions of Euros)

Growth plunges to over three-year low in Q1

Annual growth slumped to 2.4% in the first quarter, according to detailed national accounts data released by Statistics Lithuania on 1 June. The result marked a notable slowdown from the previous quarter’s 3.8% increase and was the weakest expansion since Q3 2016. Meanwhile, the economy shrank 0.3% in seasonally-adjusted, quarter-on-quarter terms (Q4 2019: +1.1% s.a. qoq), the first contraction since Q4 2009.

The first-quarter slowdown was mainly due to the lockdown measures implemented in March to contain the coronavirus pandemic. Domestic demand faltered in Q1 as household consumption growth slipped to an over two-year low (Q1: +2.3% yoy; Q4 2019: +3.4% yoy) and fixed investment growth slowed to its lowest since Q3 2016 (Q1: +1.6% yoy; Q4 2019: +5.2% yoy). Meanwhile, government consumption held up relatively well in the same period (Q1: +0.6% yoy; Q4 2019: 0.7% yoy).

In the external arena, metrics were similarly downbeat. Exports of goods and services were particularly hard hit (Q1 2020: +0.9% yoy; Q4 2019: +7.7% yoy) amid the collapse of global trade flows and the country’s closure of its international borders in March. In a similar fashion, imports of goods and services barely increased in Q1 (Q1: +0.1% yoy; Q4 2019: +1.9% yoy), reflecting softer consumer demand at home.

The economy is set to shrink considerably this year as the health crisis impacts both domestic demand and the external sector. Although the country has largely emerged from lockdown in early June, social distancing measures and the fear of a second wave of infections will likely weigh on consumer demand and investment activity through to year-end. Similarly, the external sector is set to be hit hard by falling tourist arrivals and significantly lower foreign demand for merchandise exports. On a more positive note, a jump in public spending should soften the downturn, after the government announced a EUR 5.0 billion economic stimulus package in March.

FocusEconomics panelists see the economy contracting 6.0% in 2020, which is down 0.1 percentage points from last month’s forecast. In 2021, the economy is expected to rebound and grow 5.0%.