In May, it was forecasted that the country’s gross domestic product would grow by 2.9 percent.
According to the fund’s experts, economic activity will be supported by strong domestic demand, wage growth, EU fund investments, fiscal policy stimulation, and the payment of second-pillar pension funds, the Ministry of Finance reported, based on the latest IMF report for Lithuania.
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“The assessment confirms that the Lithuanian economy remains resilient despite the complex geopolitical environment, energy price fluctuations, and other external challenges. However, the country’s long-term economic success will depend on our ability to implement reforms that promote productivity, innovation, and investment,” said Finance Minister Taurimas Valys in a statement from the Ministry of Finance and the Bank of Lithuania (LB).
“The IMF emphasizes that we must rely not only on strong domestic demand but also on sustainable long-term sources of growth,” said LB Board Chairman Gediminas Šimkus in the statement.
According to the fund, risks to the country’s economy include geopolitical tensions and potential disruptions in global trade, as well as energy price fluctuations. However, the impact of these factors can be partially mitigated by strong domestic consumption.
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According to the IMF, Lithuania needs to strengthen the labor market, public finances, and pension system, encourage investments in innovation and technology, and ease business access to financing and investment conditions.
The IMF also calls for fostering more sustainable economic growth by increasing productivity, deepening capital markets, and accelerating digitalization, as the current factors supporting the country’s economy are temporary. The fund suggests Lithuania find stable sources of income, use public finances more efficiently, and maintain adequate fiscal reserves.
The IMF did not change its inflation forecast and continues to predict that inflation will reach 5.2% this year—mainly due to increased energy prices, strong domestic demand, and the impact of some tax changes—but inflation should normalize in the medium term.
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