Evaluating the result of the first quarter of Lithuania’s GDP, one can be happy that both GDP and sectoral data show an obvious improvement in the situation of the Lithuanian economy – the economy has come out of stagnation, which was recorded in the second quarter of 2023. half a year, gradually transitioning to more sustainable growth. When evaluating the sectoral data, in the first quarter of this year, positive trends prevailed in industry and retail trade – both sectors returned to the growth territory.
In the first quarter of this year, compared to the first quarter of 2023. in the quarter, manufacturing output (excluding oil refining) increased by 2.2 percent. – due to falling energy prices, the chemical industry (fertilizers) shows double-digit growth, and the annual dynamics of wood and furniture production improves due to reduced inventories – for example, in March of the last 3 months. the moving average of the annual change in production in the wood industry was already positive and amounted to +1 percent. What’s more, the optimistic expectations of Lithuanian consumers and the recovery of purchasing power pushed the retail trade sector upward in the first quarter, where the turnover grew by 2.5 percent during the year.
Among the main sectors of the Lithuanian economy, the most difficult situation is currently in the transport sector, which is well indicated by the expectations of Lithuanian service sector companies: although the expectations of the service sector stopped deteriorating in March, in March they had fallen to around 2020. summer level – these data indicate a continuing recession in the Lithuanian transport sector.
However, although the result of the GDP of the first quarter of Lithuania was encouraging, it should be noted that such a good GDP indicator of the first quarter was partly due to the low level of 2023. the base of the first quarter, when Lithuania’s GDP decreased by 2.1 percent. In other words, the impressive GDP growth in the first quarter of this year was partially due to the poor GDP result of the first quarter of last year, with which 2024 is compared. first quarter GDP. I think that in the second, third and fourth quarters, the economic growth may slow down a bit, since the economy stagnated in the mentioned periods, that is, from the second quarter of 2023. the base will be less favorable for this year’s GDP growth rate.
Not only that, there is another risk – that the recovery of Lithuanian industry may “hit the ceiling” and remain relatively slow. European Commission surveys show that eurozone industry got off to a weak start to the second quarter, with the eurozone industrial confidence index in April at its lowest level in 45 months since 2020. of July
In April, the opinion of Eurozone producers about orders was the worst in 43 months, and in the last few months, the level of inventories of manufactured products in the Eurozone industry is no longer decreasing – this indicator strongly affects the “revolutions” of Lithuanian industry.
Therefore, I would not exclude the risk that despite a good start to the year, we will have a lethargic export recovery in the second quarter, and the economy will be driven up by one component the most – domestic consumption, which should continue to grow due to the recovering purchasing power of the population.
In summary, the Lithuanian economy has successfully transitioned from economic stagnation to a phase of economic growth, and this should be viewed positively, but the path to economic recovery will be bumpy both because of the base effect (from the second quarter, we will compare Lithuania’s GDP not with the falling GDP of the same quarter in 2023, but with stagnation), both due to the slow recovery of the cyclical sectors of the Eurozone economy.
Tags: Alexander Izgorodin Stagnation entered phase economic growth
