Main research findings relevant to Lithuania: the country’s economy is increasingly supported by high value-added exports and defense investments, but the transport sector faces the highest risk among all analyzed sectors.
Lithuania’s growth – faster than neighbors
In 2026, Lithuania is forecasted to have a 3.0% GDP growth, compared to 2.1% in Latvia, 2.0% in Estonia, and 2.0% average in CEE. However, Lithuania is also expected to have a higher average annual inflation – 5.0%, compared to 3.2% in Latvia, 3.0% in Estonia, and 3.7% in the CEE region. Lithuania’s business environment is rated A1 (favorable), and the country’s risk – A4 (justified). Latvia’s indicators are the same, while Estonia’s country risk is rated more favorably – A3.
Latvia’s and Estonia’s growth is mainly supported by domestic demand, while Lithuania’s is supported by ICT, electronics, and high value-added manufacturing.
In 2027, Lithuania is forecasted to have a 2.9% GDP growth, compared to 2.4% in Latvia and Estonia and 2.3% average in CEE. However, Lithuania’s inflation is expected to remain higher in 2027 – 4.1%, compared to 3.0% in Latvia, 2.7% in Estonia, and 3.3% average in CEE.
“Lithuania’s economy is currently growing faster than neighboring countries’ economies and has a broader range of growth drivers, but at the same time faces significantly higher price pressures. For companies, this means the need to carefully assess how higher inflation and financing costs affect expenses and demand. A positive signal is that Lithuania’s growth is supported not only by consumption but also by exports and strong manufacturing dynamics. However, in 2027, domestic demand will be less favorable for growth, as this year consumption is significantly supported by the one-time effect of the second pension pillar fund withdrawals,” says Mindaugas Sventickas, head of Coface Baltics.
Electronics and laser sectors strengthen Lithuania’s position in the CEE region
Coface identifies Lithuania’s most promising export areas as information technology services, electronics, and photonics. Electronics manufacturing has grown much faster than in many CEE countries, nearly doubling since 2021; companies are integrating into European semiconductor, industrial automation, and high-tech chains, and the sector remains one of the most competitive in the region. Lasers and photonics are globally recognized in science, medicine, defense, and semiconductor manufacturing, competing with technological expertise and innovations. EU investments in technological autonomy, semiconductors, and defense open development opportunities for these and advanced engineering companies.
According to Mateusz Dadej, head of Coface economic research for CEE countries, manufacturing in CEE is distinctive and diverse: electrical equipment and chemical industries perform well, and the EU’s SAFE program is expected to give an impulse.
Defense economy becomes a new growth factor
CEE countries, especially on NATO’s eastern flank, are among the most active EU states investing in defense; this increases demand for military equipment, metal processing, electronics, engineering, construction, and logistics. In Lithuania, investments in military infrastructure, defense industry, and local supply chains are growing. SAFE can encourage manufacturers and technology companies; based on funding share of GDP, Baltic states could be among the biggest beneficiaries, and Lithuania could utilize about 6.4 billion euros of SAFE funding to strengthen defense capabilities. The aim to become a regional defense and high-tech center opens export and investment opportunities.
Transport – the sector under the greatest strain
Coface identifies transport as the highest risk sector in Lithuania, pressured by geopolitical disruptions on eastern routes, driver shortages, rising labor and regulatory costs, increased fuel prices, and slower trade growth. In Lithuania, 13 transport companies went bankrupt in Q2 2025, 35 in Q1 2026, and 30 in Q2 2026. Of 15,605 CEE transport companies analyzed over 12 months until December 2025, 25% saw risk worsen, 20% improved, 11% moved from low to high risk, and 0.58% became insolvent.
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“Transport remains strategically important to Lithuania’s economy, but currently it is the highest risk sector in the country. We see a growing number of transport company bankruptcies, and across Central and Eastern Europe, the risk profile of a significant part of the sector’s companies is deteriorating. Therefore, it becomes especially important for transport companies to continuously assess the creditworthiness of clients and partners and closely monitor risk changes in their supply chain,” emphasizes M. Sventickas.
Three Baltic countries – three different sector stories
Comparison of the Baltic countries shows different strengths and risk hotspots. In Lithuania, the ICT sector is rated most favorably, and the transport sector is the riskiest. In Latvia, the wood sector is most favorable, and transport is riskiest; plywood exports grew 5% year-on-year in Q1 2026. In Estonia, pharmaceuticals are most favorable, and the highest risk is in the chemical sector; the pharmaceutical market is valued at about 528 million euros, with a forecasted 6.5% growth in 2026.
Poland’s growth – an additional boost for Lithuanian exporters
Poland will remain among the fastest-growing major EU economies: GDP – 3.6% in 2025 and 2026, 3.2% in 2027; CEE – 2.0% in 2026 and 2.3% in 2027. Growth is supported by resilient private consumption and the absorption of EU funds peaking by the end of 2026, promoting infrastructure and green transition investments. Inflation in 2026 is 3.0% (CEE – 3.7%), country risk – A3, business environment – A2.
The most favorable sector is ICT, supported by consumption, skilled labor, and RRF public procurement. Higher risk is recorded in the construction sector – insolvency cases in this sector increased by 12.6% in the first half of 2026, although a decrease is expected in the second half due to accelerated implementation of EU-funded projects and investments in dual-use military infrastructure.
“Looking ahead, Poland will become an even more important trade partner for Lithuania. Its economy is growing faster than other key Lithuanian trade partners, so economic ties between the two countries should strengthen,” forecasts M. Dadej.
CEE: heavy industry pressured, EU funds cushion the blow
In CEE, construction, textiles, transport, and wood sectors are assigned very high risk; automotive, chemical, metals, and paper sectors high risk; agriculture and food, retail, pharmaceuticals, ICT, and energy sectors medium risk.
The region is pressured by energy and raw material price shocks, supply chain disruptions, and competition from China: imports from China grew about 17% year-on-year to a record 145 billion USD. Economists increasingly call this trend “China shock 2.0.” Weak domestic demand in China drives exports to Europe, reducing margins, especially in electronics components, automotive, chemical, and metals sectors, which are burdened by energy costs and structural challenges.
The most resilient higher value-added segments are lasers, photonics, specialized electronics, engineering solutions, and niche products; their advantage is created not by price but by technology, innovation, and integration into European chains. Long-term competitiveness will depend on investments in automation, high technology, productivity, and specialized products. RRF and SAFE promote investments in construction, healthcare, digitalization, and defense.
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