Photo by ZUMA Press/Scanpix.
Although due to the aggravated geopolitical situation, there is still great uncertainty about the growth of the world economy, economists do not change the growth forecasts for Lithuania both for this year and for 2025. SEB bank economists expect that the country’s GDP will grow this year as well, and will reach 2.8% next year. The Organization for Economic Cooperation and Development (OECD) is a bit more optimistic: it predicts a 3.1% growth for Lithuania, and the main driving force of growth will be investments, which will be promoted by Use of EU funds.
“Consumption will be boosted by rapid real wage growth as inflation declines, while unemployment is forecast to decline slowly.” Exports will gradually recover after a sudden slowdown, as external demand from trading partners will increase,” the OECD review for Lithuania states.
Tadas Povilauskas, SEB bank’s economist, while presenting the updated forecasts on Thursday, said that the bank’s economic growth forecast for this year is quite conservative, as it was confirmed even before the publication of the GDP indicator for the first quarter of this year, whose growth exceeded expectations.
“Without changing assumptions about GDP changes in the coming quarters, real GDP should grow by at least 2% this year,” commented the economist.
The State Data Agency announced on Tuesday that Lithuania’s real GDP in 2024 in the first quarter compared to the corresponding 2023 in the quarter, after removing the influence of the season and the number of working days, it increased by 2.9%.
According to Eurostat, this was the fastest annual quarterly growth among EU countries that published first-quarter GDP growth figures.
“I have no doubt that we will observe growth in the second and third quarters”, explained T. Povilauskas.
Looking at the statistical data, it can be seen that our country’s economy is moving from stagnation to growth phase.
Indrė Genytė-Pikčienė, Chief Economist of Šiaulių bankas, predicts that we will see an even more significant breakthrough in recovery in the second half of the year, because for now the environment of high interest rates, unfavorable for economic growth, is still operating.
“(High interest rates – VŽ) narrowed freedom of financial maneuver of companies and households affects expectations, consumption and investment plans, external demand, cyclically sensitive sectors and the behavior of economic participants themselves”, said I. Genytė-Pikčienė.
“The European Central Bank (ECB) is likely to start easing monetary policy from June,” according to Bloomberg’s commentary.
SEB analysts believe that the ECB will cut the base interest rates four times this year, and the base interest rate for using the deposit option will decrease from 4% to 3%. At the end of next year, the interest rate in the euro area should drop to 2%.
Decreasing interest rates should give momentum to some Lithuanian industries that have experienced a recession – chemicals, wood, furniture.
Economists say that the growth of the country’s GDP was mainly positively influenced by further increasing investments: in the first quarter of this year, the construction volume increased by ten. Some industrial sectors have also already recovered from the bottom.
In addition, the purchasing power of the population is currently growing strongly in Lithuania – its growth is one of the fastest in the European Union. This has boosted the retail sector. There is less light so far in the transport segment – here the recession continues.
It seems that Lithuanian exporters will be able to inspire more optimism already this year: it is predicted that the reduction of interest rates will give a fairly clear start to the recovery of expectations and consumption in the export markets.
The OECD expects that the euro zone in 2024 will grow by 0.7%, and in 2025 – 1.5%; USA – 2.6% and 1.8%, respectively; China – 4.9% and 4.5% respectively.
The outlook for the 20-nation euro zone has brightened after economic activity weakened due to higher inflation, rising interest rates and weak global demand. The euro zone, which is extremely important for our country’s exporters, finally emerged from recession, and the growth of its four largest economies (Germany, France, Italy and Spain) was much faster than expected.
The region’s recovery is being helped by Germany, which has emerged from a similar crisis caused by a troubled industrial sector.
True, among the brighter colors of the future economy, there is another darker stroke: the OECD review notes that great uncertainty remains. Inflation may remain higher for longer, leading to slower-than-expected interest rate cuts, which could lead to further financial vulnerabilities.
As Nerijus Mačiulis, CEO of “Swedbank” says. economist, many will probably admit that they were surprised by the resistance of the economies of both Lithuania and many other countries to high interest rates, but they are slowly sinking into the balance sheets of companies and residents. Therefore, to say that we are already out of this forest and have avoided more shocks, we need to see a decline in interest rates.
And for now, as analysts have repeatedly said, the business must be ready to take a low starting position. Just don’t dwell on it too much.
EDITORIAL ARTICLE (editorial) – an essay reflecting the opinions of the editorial office, written in its name, often without specifying the specific author, often responding to some events, facts, trends. It is characterized by a small, often the same volume for all editorial articles in the publication, a concise presentation of ideas, thesis-like argumentation, and elements of journalistic rhetoric are used. It is customary to present conclusions, summaries that reflect the editorial’s provisions. / Encyclopedia of Journalism /
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