iauli bank economists predict that the Lithuanian economy will grow by 2% this year, and next year growth will accelerate to 2.7% after last year’s 0.3% real GDP decline.
It is expected that the average annual inflation in Lithuania will grow to 0.9% in 2025. will increase to 2.3%, when consumer prices increased by 8.7% last year, and in 2022 18.9%.
Indr Genyt-Pikien, Chief Economist of Iauli Bank, says that after double-digit inflation, in 2022 and 2023 at the beginning, we are currently leading the EU in terms of inflation rates.
Inflation rates, going back to two years, are much more moderate eg. This led to the recovery of purchasing power, which will continue to grow and strengthen, said I. Genyt-Pikien during the remote delivery.
According to her, temporary deflationary processes are possible, which are possible and desirable at such a price, but a continuous price reduction would be undesirable, and a small price increase would lead to a positive and faster recovery of consumption, business activity and investments in Lithuania.
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According to the economist of the Iauli Bank, Lithuania, which showed the fastest economic recovery in the EU in the first quarter of the year (GDP per year increased by 2.9%), should grow in the next four as well, and the rising cost of money and borrowing in the euro zone will also contribute to this.
There is an expectation that the European Central Bank will start cutting interest rates as early as the end of the year. At that time, the expectation of the US interest rate change will decline in the fall, taking into account the fact that the US economy is much more resistant (than the euro zone) to withstand high interest rates, commented I. Genyt-Pikien.
However, according to economists, the citizens and residents of Lithuania have withstood the impact of the wage rate increase from negative to about 4% quite well.
How the expensive palkan managed to work
This was compounded by stricter borrowing restrictions (e.g. the maximum limit of the loan and the resident’s income) and additional requirements for credit emergencies (e.g. accumulating larger capital reserves to counter a possible bad loan).
In his commentary, I. Genyt-Pikien also states that the Lithuanian economy was well prepared for the difficult period compared to what happened after 2008-2009. financial crisis
This was determined by the level of indebtedness of the population and businesses, the successful years of development after the pandemic, which helped economic participants to accumulate financial reserves, and more investments from the European Union’s structural fund, which reached Lithuania on time.
Due to this approach, even in the face of high wage rates and slower demand, we did not change our production capacity and did not reduce the number of employees in order to be ready to be flexible and quickly respond to the recovery of export demand, the bank’s economist said.
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Labor market, salaries
According to I. Genyts-Pikiens, the labor market also remains dynamic according to the bank’s forecasts, the average unemployment rate will be 7.2% this year, and 6.5% next year, when it reached 6.8% last year.
According to her, the more passive demand for workers shows that the labor market is experiencing a slower phase of the business cycle.
From 2022 in September new jobs are registered less than newly unemployed, and m. in January, the average number of new jobs registered per month was 1.5 times lower than the five-year average.
Although the first half of the year is not easy for us due to high wage rates, slower demand and the effects of the fallout of inflation on income, wage growth remains fast.
It is predicted that the average gross wage will grow by 9.5% per year, and in 2025 8.7%.
I. Genyt-Pikien says that the annual salary growth is stimulated by last year’s decisions to raise the monthly minimum wage by a tenth from the beginning of the year and to improve the remuneration of public sector employees.
It is an election year, so it is likely that political decisions regarding income growth next year will be no less generous, added I. Genyt-Pikien.
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Topic Finance
Tags: GenytPikien prices falling Lithuania growth recovering fastest
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