Flash comment: Lithuania - July 30, 2019
Strong and well-balanced economic growth continued in Q2

Lithuanian economy remained resilient to the global challenges and continued growing at an accelerated pace. GDP has increased by 4% (when season and calendar adjusted) and 4.1% (without the adjustments) in the second quarter of this year, compared to the same period a year ago. Meanwhile, in quarterly terms, the seasonally adjusted GDP for Q2 has increased by 0.9%. Moreover, the first quarter growth was revised up from 1% to 1.2%.

The main drivers of positive GDP growth in the second quarter was consumption, the repair and storage of motor vehicles, as well as accommodation and food services. Negative impact was felt by changes in value added of agriculture, forestry and fishing, finance and insurance companies.

Annual growth in manufacturing and exports of goods seems still strong but losing the momentum when looking to the data of the few last months.

Outlook: growth to slow down in the second half this year and 2020

This year could turn out to be better than initially anticipated and be well above our current forecast of 3.0%. But there are plenty of external risks. Weak German manufacturing, disordely Brexit, further trade war escalation could very well transfer into weakness in Lithuanian economy in the second half of the year. But so far manufacturing sector is not strugling and services are booming as domestic consumption is supported by rapid wage growth and modest inflation.  There is a limit to growth however, as labour slack is diminishing quickly and capacity utilization remains at historically high levels. Investment to both human and physical capital is the key to bringing up potential growth in the medium term.

For more information about this report, please contact:

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

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