The economist from “Citadele” bank believes that this year the economy will be further stimulated not only by consumption but also by exports.
Read more Due to concerns about welfare and hygiene, Japan will conduct an investigation of animal cafes
“It is very likely that we will slightly increase Lithuania’s economic growth forecast. Because we see the recovery of the eurozone economy, the recovery of the German economy, the strong recovery of the Scandinavian economy – this is beneficial not only for Estonia but also for Lithuania itself,” said the analyst in an economic review in Palanga on Thursday.
“This year it would be wrong to say that only the pension reform will drive the economy upwards, but exports will contribute very strongly. (…) One of the aspects is the relatively stronger European and Scandinavian economy,” he added.
According to A. Izgorodinas, Lithuania’s industrial growth will also be the fastest in several years in the near future. This will be influenced by the fact that the majority of industrial production is exported.
“In this case, both the sluggishness and recovery of the German economy are beneficial to us, because when the German industry is doing poorly, German manufacturers look for cheaper contract manufacturing suppliers, and one of those suppliers is Lithuania. But another thing is that our companies are indeed competitive and have integrated quite well into European value chains and have certainly not lost their competitiveness. And the third aspect is defense funding,” explained the analyst.
According to A. Izgorodinas, due to the withdrawn funds from the second pension pillar, retail trade will continue to break records, which will also support economic growth.
“Regarding retail trade, we believe that in the near future those numbers will seem astronomical. And Lithuanian retail trade, excluding prices, will very strongly break historical records every upcoming month. This is very strongly related both to the impact of the pension reform and to the fact that Lithuanian consumer expectations have very strongly recovered,” he said.
“Currently, Lithuania is one of the leaders in Europe in terms of population optimism. And economic growth, pension reform, and population optimism should raise our consumption upwards quite strongly,” said the economist.
Read more Prime Minister: CIA Director’s visit to Moscow shows continued support for Europe and Ukraine
Growth will also be stimulated by the real estate and construction market.
“One of the sectors is somewhat in a slump – offices. The office market in Lithuania is really quite cold and cooled down. But speaking about residential housing, we are optimistic, even despite the European Central Bank raising interest rates,” said A. Izgorodinas.
Meanwhile, pension funds and the consumption boom prevent inflation forecasts from being cut. The bank forecasts that the average annual inflation in Lithuania will reach 5.8% this year and 3.4% next year.
Risks for next year – due to the heating season
The “Citadele” economist says that the biggest questions about next year’s economic prospects are raised by the upcoming heating season, which could shock the economy.
“I am eagerly awaiting the end of October because at the end of October, new heating prices will likely be announced. And I think they will be significantly higher, and heating will definitely be more expensive. We will still finish this year with the current heating prices, which are high compared to the year before last, but next year will be even more expensive,” said A. Izgorodinas.
The price of gas has doubled since the start of the war in Ukraine, and the price of biofuel in Lithuania has risen by 50% over the year. (…) This means that the next heating season could be not just a few but several percentage points more expensive. This will be a certain shock to the economy, and the heating season will “consume” part of the pension reform funds, which will be directly used for a first-necessity service – heating,” he said.
According to A. Izgorodinas, Lithuania’s industry should look strong next year because the European economy is expected to recover more and more.
“This year, the economy is strongly driven upwards by the domestic market; next year, domestic market growth will slow down, and the economy will be driven upwards by strong industry because the European economy is recovering, and this is very beneficial for us,” said the economist.
Read more Lightning theft in the museum: a Bronze Age treasure worth millions disappeared in 4 minutes
He forecasts that Lithuania’s economy will grow by 2.3 – 2.5 percent in 2027.
