Page 34 - CE Outlook Regions 2023

The IMF expects Lithuania’s GDP to grow 1.8% in 2022 and 1.1% in
2023. While the forecast for 2022 remains unchanged from the one in
April, the estimate for next year has been cut by 1.5 points, more than
halving it.

The slower growth will be mainly due to slowing consumption, which is
negatively affected by the declining purchasing power of the population
due to inflation. Another important factor is the slowdown in major euro
area economies, which is reducing demand for Lithuanian exports.

The IMF emphasises the importance of reinvigorating structural reforms
to promote dynamic and inclusive growth, including through active
labour market policies and efforts to integrate refugees in the Baltics.
Noting that the Baltic social policies have effectively kept inequality on a
declining path, the IMF has called for further actions to address social
gaps that could be exacerbated by high food and energy prices. It has
also called for further efforts to ensure energy security and for
accelerating the green and digital transitions.

2.5.2 External environment

The Bank of Lithuania said in its report on the balance of payments for
September 2022 that, compared to August, the deficit on the current
account balance slightly narrowed (3.7%) to €276.2 million. This was
due to an increase in the services surplus and a narrowing of the
primary income deficit, which offset a significant widening of the foreign
trade deficit. Lithuanian exports have been adversely affected by
severed relations with China and Belarus, and by soaring prices of
energy imports.

Exports of services, which increased by 11.0% more than imports
(5.1%), contributed 23.4% to the services surplus, amounting to €533.0
million. The foreign trade deficit widened by 26.6% to €705.0 million,
driven by an increase in goods imports outpacing goods exports (by

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