Country Report Lithuania
- ID: 2138679
- November 2015
- Region: Lithuania
- 25 Pages
- The Economist Intelligence Unit
Real GDP growth came to 1.8% year on year in the third quarter of 2015 (seasonally and working-day adjusted), according to a flash estimate from Statistics Lithuania, up from 1.3% in the first quarter and 1.4% in the second. In quarter-on-quarter terms, growth came to 0.5%. We will be revising up our full-year forecast by about 0.2 percentage points, from 1.5% currently, in the light of this data.
A full breakdown of the data is not yet available, but high-frequency indicators combined with first-half trends suggest that third-quarter growth was driven by domestic demand. Private consumption grew by 3.9% year on year in the first quarter and 5.4% in the second, as steady rises in employment (up by 27,000 people annually by mid-year) and wages (up by 4.5% year on year in the first half) raised disposable income. Real retail trade turnover growth averaged 8% year on year in July-September, suggesting that household spending growth remained robust. Meanwhile, we expect the strong growth in investment in the first half to have continued in the third quarter.
Net exports have provided the main drag on growth so far this year, subtracting 5 percentage points from the headline figure in the first quarter, and 6.2 percentage points in the second. This resulted from a steep fall in demand from Russia, Lithuania's largest trade partner, owing to the ongoing Russian sanctions on EU foodstuffs and the sharp contraction in the Russian economy. Lithuanian exports to Russia fell by 40% (in nominal terms) in January-August, while healthy domestic demand ensured continued import growth. We therefore expect a further negative contribution to growth from the external sector in the second half.