Analytics, Economics, EU – Baltic States, Funds, GDP, Investments, Lithuania, Markets and Companies

Gediminas Simkus, director of the Bank of Lithuania's Economics and Financial Stability Service, says that domestic consumption was a key driving force of the economy, but there was also a major improvement in investment and exports.  

"We have seen recently a significant decline in the use of EU funds, which account for about one-sixth of the total investment. In 2017, however, investment growth was driven by the private sector, with growth recorded in investment in vehicles, residential and non-residential buildings, and machinery and equipment. Companies increased their production capacities, which contributed to export growth," he said at a news conference.

In its latest forecasts released on Tuesday, the Bank of Lithuania sticks to its GDP growth estimates of 3.6% for this year and 2.8% for next year.

However, the central bank revised its inflation estimates upward to 3.7% for 2017 and 2.6% for 2018, from 3.4% and 2.2%, respectively, projected in in late September.

"The inflation growth next year is due to rising prices for oil and commodities and rising wages in Lithuania," Simkus said.

"The upward revision of the inflation forecast reflects the outlook for oil prices. We expect oil prices to rise at a faster rate than we forecast some time ago," he added.

The central bank forecasts that Lithuania's export growth will reach 9.4% this year before slowing down to 4.5% next year. It expects unemployment to decline to 7.1% in 2017 and ease further to 6.8% in 2018.