Lithuania Government Consumption (ann. var. %)

Government Consumption in Lithuania

GDP records sharpest contraction since Q2 2020 in Q1

According to a first estimate, GDP contracted at a steeper rate of 3.6% year on year on a seasonally and calendar-adjusted basis in Q1 2023, compared with the 0.4% contraction recorded in the fourth quarter of last year. Q1’s reading marked the sharpest contraction since Q2 2020. Ahead of a comprehensive breakdown, the annual GDP deterioration came on the back of weaker performances in the manufacturing, wholesale and retail trade, transportation and storage, and real estate sectors. Weaker growth in exports likely further contributed to Q1’s decline.

Meanwhile, on a seasonally adjusted quarter-on-quarter basis, economic activity dropped 3.0% in Q1, following the previous quarter’s 0.5% contraction. Q1’s reading marked the sharpest downturn since Q2 2020.

More detailed information will be released on 31 May.

Commenting on the outlook, Tadas Povilauskas, an analyst at SEB, said:

“The Lithuanian economy is poised to stagnate in 2023. […] External demand for goods is hardly likely to recover strongly over the next few quarters. We assume that if inflation decelerates further, household consumption will start contributing to economic growth in the second half of 2023. Increased absorption of EU funds will have a marked impact on the economy this year. We expect a GDP decline of 0.2 per cent in 2023. We also lowered our 2024 projection from 3.5 to 2.7 per cent.”