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International Internet Magazine. Baltic States news & analytics Saturday, 11.07.2020, 20:40

Central bank: Lithuania's economy will shrink 9.7% in 2020

BC, Vilnius, 05.06.2020.Print version
Lithuania became one of the economies in May 2020 with the fastest rate of return back to normal as growing residential mobility allows to believe that a major part of internal demand will get back to normal, and the situation in the labor market is also showing signs of stabilization, Vitas Vasiliauskas, board chairman of the central Bank of Lithuania, says, cites LETA/BNS.

"The economic situation is a bit better than we expected in March. (…) One of the key positive elements having impact on making projections for our economic situation is that GDP growth was still recorded in the first quarter, despite the quarantine. (…) Therefore, there's a possibility that the annual result will be better than we estimated in March," Vasiliauskas told a press conference on Friday.

The Bank of Lithuania estimates that, under its baseline scenario, the country's economy will shrink 9.7% this year, 1.7 percentage points less than it projected in March. The main reason behind that is a drop in private consumption which is expected to go down by 12.5%, down 2.7%age points from the March projection.

The public sector's consumption is expected to grow by 2.9% this year. Gross fixed capital formation (investment) is forecast to decline by 8%, and exports and imports are projected to fall by 13.8% and 10.5%, respectively. 

The central bank forecasts that the unemployment rate will rise to 11.9% due to the impact of the pandemic, wages will shrink by 2.6% and inflation will reach 0.6%.   

It expects Lithuania’s real GDP to grow by 8.3% next year. Private consumption will likely rise by 8.6% and the public sector's consumption will edge up by 0.8%. Investment is expected increase by 5.4%, and exports and imports are forecast to grow by 14.6% and 12.6%, respectively. 

Unemployment should ease to 8.8% in 2021. Wages should grow by 2% and inflation should reach 0.6%.   

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