Vaidotas Šumskis, Chief Analyst at Finora Bank
The Bank of Lithuania’s latest quarterly report offers some encouraging news: the country’s GDP is expected to grow by 2.2% this year, which is 0.3 percentage points higher than predicted in June. The forecast for 2025 remains steady, with growth expected to reach 3.1%.
While the economy has bounced back in the first half of the year, lingering uncertainties—like ongoing wars and slower growth in China and Germany—are slowing Lithuania’s economic recovery. Despite this, businesses focused on the domestic market are holding strong. With people earning more, they’re spending more on goods and services. Investments in energy, defense, infrastructure, and transportation are also boosting revenue for construction and energy companies.
But it’s a different story for exporters, who are facing some tough times. Orders are barely increasing, and rising labor costs are eating into profits.
It’s a bit of a tug-of-war. On one hand, if foreign demand picks up, we could see faster economic growth. On the other, if orders continue to fall and labor costs rise, some companies—especially those with lower-value products—might have to cut jobs.
This leaves business owners and investors asking the big question: is now the right time to invest and expand, or is the economic outlook too uncertain? According to the Bank of Lithuania, there’s reason for optimism. Lower inflation and interest rates are creating better financial conditions, which could boost confidence both in Lithuania and across the EU. Plus, more EU funding is expected to flow into the economy next year, potentially reviving foreign markets and increasing demand for Lithuanian products.
Although wage growth might slow down compared to recent years, it will still play a key role in boosting consumer spending at home, which in turn should keep driving the economy forward.