Country Report Lithuania
- ID: 2138679
- May 2016
- Region: Lithuania
- 25 Pages
- The Economist Intelligence Unit
The flash estimate for first-quarter growth, published by Statistics Lithuania, indicates that the economy expanded by 0.8% quarter on quarter in this period (seasonally and working-day adjusted), up from 0.5% in the final quarter of 2015. In year-on-year terms, growth came to 2.4%. This supports our estimate of 2.6% annual growth in full-year 2016, up from 1.6% in 2015.
Statistics Lithuania has not yet published a full breakdown of the first-quarter data, but it has indicated that growth was concentrated in wholesale and retail trade, transportation and storage, repair of motor vehicles, and manufacturing. This suggests that Lithuania's exposure to Russia is weighing less heavily on growth now than in 2015, when wholesale trade, and transportation and storage were particularly badly hit by the drop in demand caused by the Russian recession and rouble depreciation. Lithuania's exports to Russia contracted by 38% in 2015, and net exports subtracted a massive 4.6 percentage points from growth.
The pick-up to 0.8% quarterly growth in the first quarter-above the euro area average of 0.6%-suggests that the negative contribution to growth from the external sector is now moderating as the contraction in exports eases. The subdued headline growth figure last year obscured the fact that domestic demand growth was robust, with private consumption up by 4.9% year on year, as employment and wage growth remained healthy, and gross fixed capital formation up by 10.3%, reflecting strong inflows of EU funds in advance of an end-2015 deadline for funds allocated in the 2007-13 fiscal period. Although we expect investment growth to slow this year, household spending should remain dynamic as the labour market improves further.