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International Internet Magazine. Baltic States news & analytics Saturday, 04.07.2020, 05:16

Lithuania’s economy to contract by 7% in 2020, to grow by 5.9% in 2021

BC, Vilnius, 30.06.2020.Print version
Lithuania’s economic downturn, triggered by the coronavirus pandemic, likely bottomed out in April 2020 and should be replaced by a gradual recovery in the second half of 2020 following the lifting of restrictions on economic activity in Lithuania and the European Union, the country’s Finance Ministry forecasts based on the latest statistical data, cites LETA/BNS.

According to the ministry’s latest scenario of economic development, Lithuania’s gross domestic product (GDP) will contract by 7% in 2020 as a result of the shock triggered by the coronavirus crisis, but will rebound next year and grow by 5.9%.


In subsequent years, the country’s economy could expand at an average rate of 2.6% per year.


In April, the ministry expected Lithuania’s GDP to shrink by 7.3% in 2020 and to grow by 6.6% in 2021. “The economy is getting stable, the economy is recovering... Therefore we see the economy growing by nearly 6% as early as in 2021. At constant prices, however, the level of 2019 will only be reached in 2022,” Deputy Finance Minister Migle Tuskiene said on Tuesday while presenting the latest macroeconomic forecasts.


The unemployment rate in the country is expected to reach 9.5% this year while the number of employed persons is projected to decrease by 2.8%.


In 2021, the recovery of economic activity and labor force demand will drive the jobless rate down to 8.1% and the number of people in employment will increase by 1.1%.


The ministry estimates that the average monthly gross wage will grow by 1.8% this year and by further 3.3% in 2021.


The average annual inflation in Lithuania will decrease to 0.7% in 2020 before accelerating to 1.7% next year.


The external environment would remain unstable in the medium term, given the fragile outlook for economic recovery of Lithuania’s key trade partners, Tuskiene said.


The global spread of COVID-19 had not yet been stopped, which meant that various countries might be forced to reintroduce virus containment measures despite their negative effect on the economy, she added.


Other risks include a ‘hard’ Brexit that may lead to negative repercussions for the European Union’s economies, including Lithuania, in the medium term, as well as the risk of changes in the conditions of international trade.


If such risks were to materialize, Lithuania’s GDP could plunge by as much as 16.8% this year and record an increase of meager 2% in 2021, meaning that the country’s economic recovery would take longer than in the baseline scenario.

 






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