Flash comment: Lithuania - April 28, 2017
Positive start of the year: GDP growth accelerates to 3.8% in Q1

The Lithuanian annual GDP growth accelerated to 3.8% in the first quarter of this year. This was the most rapid annual growth rate since mid-2014. Meanwhile, in quarterly terms, the seasonally adjusted GDP increased by 1.4%.

The acceleration was not unexpected, as most of the indicators have been pointing towards more rapid growth. As indicated by robust developments in retail trade (7.5%, YoY) and household lending, household consumption continued to be the main driver of economic growth. Annual growth in investment probably strengthened, not least due to the base effects, but also possibly due to finally picking up distribution of the EU funds.

Exports have been also showing signs of recovery. The nominal exports of goods and services had been growing by double digits (in annual terms) over the first two months of this year. Higher prices of oil products and other goods were an important factor behind the acceleration in nominal exports, thus the real export growth rates will not be as impressive. However, picking up exports were also supported by strong performance of the whole manufacturing industry – in the first quarter of this year the manufacturing output without oil products increased by 8.7%, in annual terms. Growth in nominal exports of services remained robust as well.

Outlook: relax and enjoy the rise, for now

We expect economic growth to remain strong throughout the year. Investment growth will strengthen thanks mainly to rising public investments, but also due to faster distribution of EU funds. Meanwhile, exports are expected to stay strong due to improving economic outlook in the main export markets. Moreover, the effect of previous dampening factors, such as the last year’s poor grain harvests, will gradually ease. However, growth in household consumption is expected to decelerate as the real wage bill growth subsides.

For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt

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