Lithuania flag Lithuania: Economic and Political Overview

The economic context of Lithuania

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

As a member of the EU since 2004, Lithuania has experienced significant growth coupled with the rapid modernisation of its economy, becoming a member of OECD in 2018. The country experienced the fastest recovery in Europe from the 2009 financial crisis, partly fuelled by a well-performing banking system and a diversified industrial sector; and it was the only euro area Member State that did not see real GDP decline in the first quarter of 2020. In fact, Lithuania resisted well to the COVID-19-induced crisis, with GDP contracting by only 0.9% in 2020, followed by a rebound of 4.8% in 2021 when growth was fuelled by private demand and positive performance of the real estate and manufacturing sectors. Economic activity is forecast to decelerate over the forecast horizon, growing by 4.1% this year and 3.1% in 2023 (IMF), due to persistent uncertainty amid the ongoing pandemic.

Macroeconomic indicators are generally positive, having recorded budget surpluses in recent years. Nevertheless, sizeable stimulus packages implemented to contain the effects of the pandemic drove the budget in negative territory, at -4.8% in 2021. Despite the economic recovery, the IMF expects the budget to be negative in 2022 and 2023, by 2.6% and 1.2%, respectively. Conversely, the debt-to-GDP ratio increased to 47.4% in 2021 (from a pre-pandemic level of 35.9%), although it should follow a downward trend this year (45.5%) and the next (43.7% - IMF). Consumer price inflation surged in Lithuania towards the end of 2021, mostly driven by a spike in energy prices, the overall rate stood at 3%. Services prices are expected to increase at the fastest pace in more than a decade as a consequence of rising wages and rebounding domestic demand: the EU commission forecasts the rate to increase to 6.7% in 2022 (whereas the IMF expects it to be just above 2.8%), before moderating to 2.7% in 2023.

The Lithuanian government introduced a number of measures to protect employment and provide additional support for job seekers during the COVID-19 crisis; resulting in an unemployment rate of 6.5% in 2021 (from 8.5% one year earlier). The rebound in economic activity should gradually bring the unemployment rate down to 6% by 2023. Net migration was positive for the first time in 2019, and again in 2020, which helped to ease labour shortages (the country has one of the lowest population growth rates in the world), but it turned negative again in 2021. According to the figures released by Statistics Lithuania, around 585,000 people were at risk of poverty, with 5.1% of the population living in absolute poverty in 2020 (latest data available).

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 56.5065.5568.0372.6378.00
GDP (Constant Prices, Annual % Change) -0.15.01.81.12.8
GDP per Capita (USD) 2023242527
General Government Balance (in % of GDP) -6.6-1.2-2.1-1.3-1.2
General Government Gross Debt (in % of GDP) 46.644.742.239.537.9
Inflation Rate (%) 1.14.617.68.43.2
Unemployment Rate (% of the Labour Force) 8.57.17.37.06.5
Current Account (billions USD) 4.150.93-1.09-1.49-1.24
Current Account (in % of GDP) 7.31.4-1.6-2.1-1.6

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Agriculture contributes 3.3% to the GDP and employs 6.4% of the workforce (World Bank, latest data available). Lithuania's main agricultural products are wheat, wood, barley, potatoes, sugar beets, wine and meat (beef, mutton and pork). Arable land and permanent crops cover 2 million hectares, more than one-third of the country’s territory. According to figures from the national statistical office, in 2021 the total grain crops production stood at 5,621.3 thousand tonnes, down by 18.9% compared to the previous year; whereas the gross agricultural production reached EUR 3.2 billion (+11.7% y-o-y).

The industrial sector accounts for 24.9% of GDP, employing around 25.7% of the active population. The main industrial sectors are electronics, chemical products, machine tools, metal processing, construction material, household appliances, food processing, light industry (including textile), clothing and furniture. The country is also developing oil refineries and shipyards. The World Bank estimates that the manufacturing sector alone contributes to 15.7% of the country’s GDP.

Lastly, the services sector contributes 61.5% to the GDP and employs more than two-thirds of the active population (67.9%). The information technology and communications sectors are the most important contributors to the GDP. In recent years, tourism has been one of the fastest-growing sectors of the country's economy; however, data from the national tourism development agency shows that the total number of nights spent in tourism accommodations in 2021 was still 39.4% below the pre-pandemic level (although it was up by 15.1% compared to 2020). Lithuanian banking sector consists of 17 banks, eleven of which hold a banking or specialized banking license, and six banks operate as branches of foreign banks (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 6.4 25.7 67.9
Value Added (in % of GDP) 3.3 24.9 61.5
Value Added (Annual % Change) 5.4 0.6 -1.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
76,9/100
World Rank:
15
Regional Rank:
8

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.94/10
World Rank:
31/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Economy
Ministry of Finances
Statistical Office
Department of Statistics
Central Bank
Central Bank of Lithuania
Stock Exchange
Nasdaq Nordic
Economic Portals
Baltic Times
Delfi
 

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Latest Update: December 2022

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