WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Following a strong recovery last year, economic growth in Lithuania has been dealt a blow by Russia’s invasion of Ukraine. Big rises in the price of energy and other imported inputs for industrial production are hitting economies worldwide. In addition, the trade linkages with Russia, Belarus and Ukraine are obviously more intensive in the Baltics than in other parts of the EU. A decline in household and business sentiment alike means that consumption and investment activity will lose momentum in 2022. The government is trying to counter the loss of households’ purchasing power with an anti-inflationary package, and it should manage to keep economic activity afloat with its planned public investments. In our main scenario, we expect real GDP to grow by 1.7% in 2022, followed by an upswing of 2.8% in 2023 and 2.6% in 2024.