Lithuania projection note OECD Economic Outlook November 2023

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Lithuania The economy is projected to contract in 2023 by 0.4%, before growing by 1.7% in 2024 and 3.1% in 2025. Although inflationary pressures and supply chain disruptions are receding, higher than expected oil prices have slowed the decline of inflation and will lead to a contraction in private consumption in 2023. Uncertainty and geopolitical tensions will weaken demand in key trading partners and contribute to a slowdown in exports. Public investment, strengthened by EU funds, will support growth. The labour market remains tight with robust wage growth and shortages of high-skilled workers. Fiscal policy support is helping households and firms with elevated energy costs. Better targeting to vulnerable groups could make this more efficient. Unwinding state support of industry would alleviate some fiscal pressure. Improving participation in lifelong education would help to increase digital skills and help older workers to enter high-growth industries. More targeted support for innovation, particularly for low-carbon technology adoption, would help to tackle hard-to-abate emissions in transport and industry. Manufacturing is slowing but consumer confidence is recovering The economy slowed in the first half of 2023 as the impact of uncertainty from geopolitical tensions, rising interest rates and deteriorating business confidence weighed on activity. GDP also declined marginally in the third quarter of 2023. Industrial confidence has been negative for 17 consecutive months recording its lowest levels since the pandemic. Manufacturing production, retail sales and exports have contracted in recent months. However, consumer confidence is recovering, unemployment remains low, wage growth is robust, and inflation has eased to 3.1% in October. These factors lay the grounds for a rebound in private consumption.

Lithuania

Source: OECD Main Economic Indicators database; and European Commission business and consumer surveys. StatLink 2 https://stat.link/nfr29u

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023


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