“The dynamic and increasingly challenging geopolitical environment continues to affect Lithuania’s economy, as well as that of the EU as a whole. The growing uncertainty in international trade policy and the rise of protectionist sentiment in the global economy pose additional risks. Despite the challenges, the country’s economy is currently showing resilience – we expect the country’s economic growth to remain strong this year as exports recover. While inflation will accelerate in 2025, it will slow down to 2.7% next year. With strong demand for skilled staff remaining on the labour market, the country's average wage growth will remain strong this year, surpassing average annual inflation. This will lead to a further increase in the purchasing power of the population and encourage domestic consumption,” Minister of Finance Rimantas Šadžius says.
The Economic Development Scenario prepared by the Ministry of Finance projects that Lithuania’s gross domestic product (GDP) will continue to grow after the recovery last year, in 2025, with stronger demand in domestic and foreign markets – the growth rate will reach 2.8% and will remain similar in the following medium-term years.
As the economy grows and strong labour demand persists, the labour market will remain favourable to employees this year. In 2025, the unemployment rate is expected to fall to 7.0%, while employment growth will reach 0.3%. The unemployment rate is expected to continue to gradually decline in the following medium-term years, as the demand for skilled staff persists.
The scenario projects that this year's average gross monthly wage growth will remain strong enough to reach 8.4%. The growth rate of average gross monthly wages is expected to reach 6.8% next year.
In 2025, the inflation rate is expected to increase faster than last year, with an average annual inflation rate of 3.3%. Higher inflation will be driven by higher administered and some commodity prices, higher producer costs and strong domestic demand. In the outer years of the medium term, inflation rates will decelerate moderately to 2.5% at the end of the period.
With household disposable income growing significantly above the rate of price growth, the purchasing power of the population will continue to strengthen. Household consumption expenditure is expected to grow by 3.6% this year, and in 2026 - 2028, as he financial situation of the population continues to improve, household consumption expenditure could grow by an average of 3.4% per year.
Expenditure on gross fixed capital formation (GFCF) is expected to recover this year with stronger growth in external and domestic demand, increased investment in national security and the need to invest in green technologies and measures to increase labour productivity, and to grow by more than 5% in all medium-term years.
While the outlook for the economic development of the main trading partners has deteriorated compared to the December 2024 scenario, their growth rates are still expected to pick up over the medium term. This will positively affect the development of the country's exports, therefore, the scenario foresees that real exports of goods and services will grow by 3.5% in 2025, and the growth rate of exports could accelerate to 4.0% in 2026-2028.
The scenario is set against a background of heightened external instability and economic uncertainty, continued geopolitical tensions and growing uncertainty about international trade policy.
The intensification of Russia’s war against Ukraine and geopolitical turmoil in the Middle East, the negative repercussions of rising protectionism on international trade, shocks to energy and other commodities, food prices, less favourable developments in the euro area and the global economy, fluctuations in global financial markets, ageing population and labour shortages are some of the downside risks that may lead to changes in the baseline estimates in this scenario.
There are also positive risks, such as stronger domestic and foreign demand, faster monetary policy easing, EU-wide growth-friendly fiscal policies, faster implementation of EU-funded projects, more favourable demographic trends and immigration of skilled workers, and a faster transition to green energy, the materialisation of which could lead to more favourable economic development.
