Country Economic Forecasts > Lithuania

Q1 growth of 2.5%, driven by rising domestic demand and an improving trade balance, confirms that GDP growth is climbing back towards its 3-3.5% trend after a more modest slowdown in 2015 than initially estimated. A pick-up in consumption keeps medium-term expansion steady despite potentially more volatile trade and investment trends. Outpacing the EU in terms of production growth and wages, and hence rising imports, leads to a further widening of the current account deficit this year, but FDI will remain sufficient to finance this provided there is no sharp drop in foreign remittance income.The Social Democrats are well-placed to retain political control at the October elections, but face enough competition to keep reforming the public sector and tighten fiscal discipline if inflationary pressures build. Entry to the OECD, expected in 2018, will bring additional pressure for reform especially to state-owned enterprises, healthcare, pensions and education.