Flash comment: Lithuania - July 30, 2018
GDP growth retains pace and grows 3.7% in Q2
Annual GDP growth kept its fast pace in Q2 - the economy increased by 3.7%. In quarterly terms, the economy grew by 0.9% (seasonally and calendar adjusted).



The main drivers of growths in the second quarter were most likely consumption and investments. Retail trade (excluding motor vehicles) growth was solid in the second quarter and stood at an average of 6.7%. Strong wage growth, healthy labour market, easing inflationary pressures and consumer confidence hovering at a ten-year-high supported rising consumption.



Supported by high capacity utilization rates and picking up distribution of EU funds, investments most likely maintained rapid growth momentum.

The external sector probably contributed less to total GDP growth in the second quarter. As expected nominal growth in the exports of goods slowed down to 7% in Q2. Nominal imports picked up considerably as well mainly due to the rise of oil prices. Manufacturing excluding petroleum slowed down to 5.7% in Q2 down from 7.4%.



Outlook: growth to slow down slightly


Growth will remain strong albeit more moderate in the second half of the year. We expect GDP to grow 3.2% this year and 2.5% next year. Growth will be supported by strong consumption and investment activities. Very rapid wage growth will pose competitiveness challenges for companies, but may also incentivize companies to invest more and raise productivity in order to keep up with competition. Investment will be further supported by public sector and EU fund distribution. Trade wars remain the main macroeconomic risk right now especially to the transportation sector, but the tensions have eased slightly recently, with new tariffs being put on hold.

 

For more information about this report, please contact Mr. Vytenis Šimkus, +370 5 258 5163, vytenis.simkus@swedbank.lt

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