Growing consumption and investment encourage consistent growth of Lithuania's economy; however, a poorer outlook for the country's major foreign trade partners, as well as gradually slowing development of domestic demand led to more cautious GDP growth projections for next year. The Bank of Lithuania projects a 3.1 percent growth in GDP next year, and this is less by 0.2 percentage points than was projected in September, the Bank of Lithuania informs.
© Shutterstock nuotr.

"Both the country's domestic economy and export, particularly due to trade restrictions with Russia, will grow slower next year than was projected before. Even though the economy's growth will still be rather large, both the state and businesses, in planning income, will have to retain a healthy sense of caution," says Raimondas Kuodis, Deputy Chairman of the Board of the Bank of Lithuania.

The import restrictions introduced by Russia in August significantly impacted export of Lithuania's food products: three months after the introduction of these restrictions it decreased by half. Although food product enterprises found alternative markets and began to export to other countries, this export growth was insufficient for compensating the whole recession of export to Russia. The slower-than-projected export increase risk is related to the economic growth projections in the euro area - Lithuania's most important foreign trade partner. Therefore, the 2015 growth projection for goods and services, compared to projections in the autumn, was decreased by 0.9 p.p. - to 4.4 percent.

Poorer foreign trade trends are currently offset by growing domestic demand, especially rapidly growing private consumption and the improving situation in the job market. It is projected that next year consumption will increase by 3.6 percent (the same was projected in September), while the unemployment level will decrease to 9.7 percent (September projection - 9.9 percent).

A positive impact on consumption and increase in resident buying power was had by the recent price change trends that were favourable for consumers.

"Global prices of commodities, particularly the rapidly dropping price of oil and low inflation in the euro area allow us to believe that in Lithuania prices will increase at a slower rate than projected," says Gediminas Simkus, Director of the Economics and Financial Stability Service of the Bank of Lithuania.

The average annual inflation projection for 2015, compared to earlier projections, was decreased by 0.3 p.p. to 0.9 percent.

It is forbidden to copy the text of this publication without a written permission from ELTA.
Leave a comment
or for anonymous commenting click here
By posting, you agree to terms
Read comments Read comments

Vitas Vasiliauskas: the matter of income inequality will become only more acute next year

The cabinet’s tax and public sector policy is not contributing to resolving income inequality...

CityBee is set to join European car-sharing leaders with a 110 mln EUR investment in major fleet upgrade

CityBee Solutions, which operates car-sharing services in Lithuania and Poland, today announced an...

A new money transfer startup goes to market donating its income for social campaign

Due to the growing financial awareness of the people, alternative money transfer platforms are coming...

D. Grybauskaitė: the EU will owe us

Lithuanian farmers will not receive the sort of direct grants from the EU as were promised already...

Revolut turns new page with Lithuania-facilitated banking license

Today, Revolut together with the Bank of Lithuania have announced that the challenger bank received...