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2019/04/01 / Erste Group Research

Lithuania Macro Outlook: where does the Baltics giant go?

Economy is expected to slow down to 2.7% in 2019. Despite robust wage growth, inflation remained under control. Budget balance will most likely maintain surplus. Bond supply will be limited in coming months.

After contracting by almost 15% in 2009, in the aftermath of the financial crisis, the economy reached its pre-crisis level already in 2014. Over the last five years, it has expanded on average by 3.1%. Growth dynamics in Lithuania peaked in 2017, when the economy grew 4.1% y/y, supported by the visible rebound of investments and strong private consumption.

Similarly to other Baltic countries, the labor market in Lithuania has been flourishing over the last few years. Employment and unemployment rates have improved visibly since 2015. In 2018, monthly nominal wages increased by almost 10% y/y from roughly EUR 890 to EUR 970.

Since 2016, Lithuania has been maintaining its budget in a surplus. According to preliminary data from the Ministry of Finance, the budget balance stood at 0.6% of GDP in 2018. Public debt went down in 2018 to 34.8% of GDP, but it is projected to go temporary up to almost 38% of GDP in 2019. The figure is highly affected by the planned pre-financing of EUR 1.3bn of a Eurobond redemption that is due in February 2020.

The Lithuanian bond market is the biggest in the Baltic region and is worth EUR 13.6bn. Almost 70% of bonds are denominated in EUR, the rest in USD. Although this year’s financing needs have already been 45% covered, February 2020 redemptions of EUR 1.3bn will surely require additional bond supply this year.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focus-
Currency in focus-
Sector in focus-


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