Lithuania's Economic Outlook: Reforms and Tariffs to Influence Growth

Strategic Insights -

Lithuania's economy is poised for a growth path, with the country's gross domestic product projected to expand by 2.7% this year, 3.2% in 2026, and 2.3% in 2027. However, domestic and external decisions, such as US trade tariffs and pension system reform, will have a significant impact on economic development in the coming years, potentially slowing growth and increasing economic fluctuations. Despite this, private consumption is expected to recover and expand by 2.2% in 2025, driven by the withdrawal of funds from second-pillar pension funds, which could reach around EUR1.13 billion.

Key Takeaways:

  • The Bank of Lithuania's projections indicate that Lithuania's gross domestic product will grow by 2.7% this year, 0.1 percentage points less than previously projected in June.
  • Economic growth is expected to expand by 3.2% in 2026 and 2.3% in 2027, with the economic growth rate for next year increased by 0.4 percentage points compared to the June projections.
  • Private consumption is expected to increase by 2.2% in the course of 2025, driven by the withdrawal of funds from second-pillar pension funds, and expand by 6% next year, slowing to 0.8% in 2027.
  • The effective US tariff rate applied to Lithuania rose from 8.3% to 13.3% compared to the information available in June, slowing Lithuania's economic growth by 0.3 percentage points in 2025-2027.
  • Total Lithuanian exports are expected to expand by 3.8% this year and by 2% and 3.4% in 2026 and 2027, respectively.
  • Liquidity of private pension funds is expected to increase during the withdrawal window next year, but its impact is beyond the horizon of the current macroeconomic projections.
  • US trade tariffs and the geopolitical situation will materially affect Lithuanian exports, which are expected to grow much more slowly over the projected period than in the last decade.

Statistics:

  • Lithuania's gross domestic product is expected to grow by 2.7% this year, 3.2% in 2026, and 2.3% in 2027.
  • Private consumption is expected to increase by 2.2% in the course of 2025 and expand by 6% next year.
  • The effective US tariff rate applied to Lithuania is expected to slow Lithuania's economic growth by 0.3 percentage points in 2025-2027.
  • Total Lithuanian exports are expected to expand by 3.8% this year and by 2% and 3.4% in 2026 and 2027, respectively.
  • Average wages are expected to increase by more than 8% in 2025, accelerate to almost 9% in 2026, and be below 7% in 2027.
  • Average annual inflation is expected to reach 3.5% this year, 3.1% next year, and 2.6% in 2027.
  • US trade tariffs and the geopolitical situation will materially affect Lithuanian exports, which are expected to grow much more slowly over the projected period than in the last decade.

Sources:

  • Press release from the Bank of Lithuania (no date available)
  • Lietuvos bankas' projections (no date available)
  • Vilnius (no date available)