Flash comment: Lithuania - November 30, 2018
GDP revised upwards for the third quarter

As we expected, quarterly GDP growth has been revised up by one decimal point to -0.3% (SA) in the second GDP estimate. Annual growth has clocked in at 2.4%, two decimal points higher than reported initially. Season and calendar adjusted annual growth was 2.9% in Q3. GDP expanded 3.3% over first three quarters of the year compared to the same period last year.

The reason for quarterly contraction was poor performance in the agricultural sector. Final numbers are still not in, but it is forecasted that crop yields are 25% down this year and agriculture has a lot of impact to GDP in 3rd quarter of the year. The value added of agriculture has contracted 17.7% annually.

Consumption was still the main driver of growth, it added 2.9 p.p. to annual growth, followed by investments with 1.4 p.p. Net exports contributed 0.6 p.p. to growth even though exports were nearly flat in annual terms due to decreased volumes in imports.

Outlook: growth will ease

Manufacturing and retail trade suggests that growth will pick up in the final quarter of this year. However, we forecast growth to ease to 2.5% and 2% annually in 2019 and 2020 respectively. The main reasons for it are likely to be slowing growth of global demand and diminishing cost competitiveness. The main drivers of growth will be consumption and investments. Tight labour market should provide conditions for income growth and therefore consumption expansion. On the other hand labour shortages should incentivise firms to invest in productivity improvements. External sector performance is likely to worsen as there will be less room for export expansion, while demand for imports should grow.

For more information about this report, please contact:

Vytenis Šimkus, +370 687 17870, vytenis.simkus@swedbank.lt.

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