Economic Analysis - Labour Market To Forestall Stronger Growth - MAR 2018
BMI View: W e estimate economic growth in Lithuania to have peaked to 3.6 % in 2017, and project real GDP growth to ease to 3.3% in 2018 and 2.7% in 2019. The slowdown will be driven by weaker gains in the labour market , as well by a gradual erosion in the country's competitive edge, underpinned by the rapid rise in the country ' s unit labour costs. A greater role in driving economic growth will instead be played by rebounding investment.
The Lithuanian economy will remain on a healthy growth trajectory over the coming years, comparing favourably with its European peers, and mirroring closely the trajectory of its Baltic peers, Estonia and Latvia. Having said that, we estimate economic growth to have peaked at around 3.6% in 2017, and project real GDP growth to slow down to 3.3% in 2018 and 2.7% in 2019. Although the tightening labour market will continue to put upward pressure on real wages, weaker employment gains will result in a modest slowdown in private consumption growth, and the higher cost of labour will begin to erode the country's competitive edge. Meanwhile, a greater role in driving economic growth will be played by rebounding investment, while the contribution of the country's trade balance to growth will become close to neutral.
Weaker Labour Market Gains Mitigated By Investment Rebound
|Growth Returning To More Moderate Levels|
|Lithuania - Real GDP & Components, % chg y-o-y|
|Source: Eurostat, BMI|