Flash comment: Lithuania - June 1, 2017
Strong broad-based GDP growth

In the first quarter of this year the Lithuanian economy expanded by 3.9%, in annual terms, and by 1.4%, in quarterly terms (seasonally adjusted). This was the most rapid annual growth rate since mid-2014. This was also a relatively broad-based acceleration in growth.

Domestic demand remained the main driver of growth. The annual growth in household consumption picked up to 5.9%. This was supported by robust labour market, strong wage growth, more rapid expansion of credit to households and favourable developments in the residential real estate market.

Meanwhile, the annual growth of gross fixed capital formation picked up to 10.3%. However, the pick-up was largely resulted by low base effect - in quarterly terms, seasonally adjusted investment declined by 1.1%. Data on investments into fixed tangible assets indicates that private companies are finally investing more actively, but public investments still seem to be held back by lagging EU funds.

Supported by growing demand in the main export markets, exports of goods and services expanded by 7.8%, in annual terms. However, imports grew even faster and as a result net exports contributed negatively to annual GDP growth.

Growth in value added was broad-based across sectors. All sectors, except for agriculture, forestry and fishing, demonstrated positive annual growth. Agriculture is still going through the woes of poor last year’s harvest, but these effects are expected to wane going further into the year. Manufacturing, trade, transportation, accommodation and storage saw the highest annual growth rates in 3-4 years.

Outlook: cyclical upswing will continue, for now

We expect economic growth to remain strong throughout the year. Investment growth will strengthen as the distribution of the EU funds gains pace. 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, is likely to 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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