Lithuania's Economic Growth Projected at 2.8% Amid Rising Challenges
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Loading... - Natalie Bryon
- 25 Mar 2025
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Lithuania's economy is expected to grow by 2.8% in 2025, following a recovery last year, according to the updated Economic Development Scenario released by the Ministry of Finance. While this growth is promising, the country faces increasing challenges that could impact its economic trajectory.
The Ministry of Finance forecasts that inflation will rise to 3.3% this year but is expected to slow down to 2.7% in the following year. The unemployment rate is projected to decrease to 7.0% by 2025, with wage growth remaining robust at 8.4%. Minister of Finance Rimantas Šadžius emphasized the resilience of Lithuania's economy, stating, "The dynamic and increasingly challenging geopolitical environment continues to affect Lithuania’s economy, as well as that of the EU as a whole."
Despite the uncertainties in international trade and a rise in protectionist sentiment globally, Lithuania's economy is showing signs of resilience, particularly as exports begin to recover. The strong demand for skilled labor is expected to keep the labor market favorable for employees, with employment growth projected at 0.3% in 2025.
The average gross monthly wage is anticipated to grow by 8.4% this year, surpassing the rate of inflation and contributing to an increase in the purchasing power of the population. This trend is expected to encourage domestic consumption, with household consumption expenditure projected to grow by 3.6% this year. As the financial situation of households improves, consumption expenditure could continue to rise by an average of 3.4% annually from 2026 to 2028.
Investment in gross fixed capital formation (GFCF) is also expected to recover this year, driven by stronger domestic and external demand, increased national security investments, and a focus on green technologies. GFCF is projected to grow by more than 5% in the medium term, reflecting the need for enhanced labor productivity and sustainable development.
While the outlook for Lithuania's economic development remains positive, several external challenges could pose risks. The ongoing geopolitical tensions, particularly the intensification of Russia’s war against Ukraine, and instability in the Middle East contribute to economic uncertainty. Additionally, rising protectionism, fluctuations in global financial markets, and an aging population may impact growth.
However, there are also positive risks that could enhance economic development. These include stronger domestic and foreign demand, faster monetary policy easing, growth-friendly fiscal policies across the EU, and the successful implementation of EU-funded projects. Favorable demographic trends and the immigration of skilled workers could further bolster the economy, alongside a quicker transition to green energy.
In summary, Lithuania's economic growth is projected to reach 2.8% in 2025, supported by strong wage growth and increasing purchasing power. However, the country must navigate a complex landscape of geopolitical tensions and economic uncertainties. By addressing these challenges and capitalizing on potential opportunities, Lithuania can work towards a resilient and sustainable economic future.
