GDP per capita in Lithuania

Lithuania - GDP per capita (Euros)

Growth edges up to two-year high in Q1

Growth gained some traction at the beginning of the year, according to detailed national accounts data released by Lithuania’s Statistical Institute on 31 May. GDP rose 4.0% in year-on-year terms (previously reported: +3.9% year-on-year) in the first quarter, up from 3.8% in the previous quarter. The reading marked the strongest expansion since Q2 2017 and reflected healthy dynamics both domestically and on the external front. On a quarter-on-quarter basis, however, growth moderated to 1.0% in seasonally-adjusted terms in Q1 2019 (Q4 2018: +1.4%).

Robust domestic demand supported the first quarter’s year-on-year acceleration. Fixed investment spearheaded the expansion, growing 8.4% annually in Q1, up markedly from Q4 2018’s 3.6% rise and the strongest increase in a year. Furthermore, household consumption growth picked up slightly in the first quarter (Q1: +4.0% yoy; Q4 2018: +3.6% yoy). On the other hand, government consumption growth softened in the same period (Q1: +0.5% yoy; Q4 2018: +1.2% yoy).

External sector metrics were also upbeat: Export growth ticked up to 4.4% yoy in Q1, from 4.0% in Q4 2018, signaling that the sector remained resilient to global trade woes. This, coupled with decelerating imports (Q1: +4.0% yoy; Q4 2018: +5.3% yoy), led the external sector to positively contribute to the overall expansion at the beginning of this year.

Looking forward, Lithuania’s economy looks in good shape, although growth will moderate gradually. The election of Gitanas Nauseda, a former chief economist at SEB, as the country’s new president on 26 May has been well received by financial markets. As a part of his center-right policy agenda, Nauseda has pledged to support progressive taxes and boost Lithuania’s trade ties, while maintaining a pro-Western course.

FocusEconomics analysts see growth at 3.1% in 2019, which is up 0.1 percentage points from last month’s forecast. For 2020, our panel sees growth at 2.5%. Meanwhile, Lithuania’s Central Bank expects growth of 2.7% this year and 2.6% in 2020.