Flash comment: Lithuania - Robust economic growth did not lose pace in Q1
Robust economic growth did not lose pace in Q1

Even though Lithuania is an open economy, greatly dependent on imports and exports, country’s growth pace shows it is still reluctant to the global challenges, such as US-China trade war and German slowdown. GDP figures show that Lithuanian economy sustained the growth momentum and in annual terms increased by 4% in the first quarter of this year. In quarterly terms, the economy grew by 1%.

Growth was mainly influenced by the increase of gross fixed capital formation, exports and household consumption, that grew by 8.4%, 4.4% and 4% respectively when compared to 2018.

Value added growth was still broad-based with construction sector being the best performer – annual growth in value added has accelerated to 13.4%. It was also supported by 5.5% growth in trade, transport, accommodation and ICT that enjoyed 5% increase. Other sectors have also contributed to the growth with none having a negative annual value-added impact.

Consumer confidence reached all-time highs, suggesting that consumption growth will continue its growth path. Domestic retail trade (excluding motor vehicles), stimulated by robust wage growth, healthy labour market and easing inflationary pressures has expanded by 8.7%.

Outlook: domestic growth to slow down slightly

We expect growth to moderate to 3% throughout the year and slow down to 2% in 2020. In May industrial confidence indicators declined by 2 percentage points, mainly due to weaker demand expectations and build-up of inventories. Wage growth, together with consumer confidence, are expected to remain strong.  Due to base effects, capacity constraints and very tight labour market exports are expected to slow down. German economic slowdown and looming trade war threats also add to the uncertainty and may negatively affect export growth.

For more information about this report, please contact:

Greta Ilekytė, +370 5258 22 75, greta.ilekyte@swedbank.lt.

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