Page 40 - CE Outlook Regions 2022

2.5.1 GDP growth

After slower growth at the beginning of 2021, the Lithuanian economy
was recovering in the second half of 2021 and is likely to grow
throughout 2022.

Global economic development is expected to pick up significantly in
2022 and economic activity will also be boosted by Lithuanian
government’s support to citizens and businesses.
As businesses and the general public gained knowledge on how to
reduce the risk of contracting COVID-19, the second and third wave of
the pandemic did not lead to a decline in manufacturing output in
Lithuania.
However, the new variants of COVID-19, coupled with geopolitical
tensions with Belarus (Lithuania is to lose around one third of its cargo
turnover at the Port of Klaipeda with Belarusian freight banned, a result
of EU and US sanctions against Belarus), and with China over Taiwan,
will impact the economy negatively in 2022.
It is projected that Lithuania’s real GDP will expand by 5.1% in 2021,
and by 4.1% in 2022.

Investment will be a key driver of growth over the medium term.
Infrastructure investments as part of the flagship construction project
Rail Baltica will amount to €2.5bn (4.8% of GDP), which will be spread
across the main construction period in 2022-26, partially financed from
EU cohesion funds.

In addition to sizeable payments to farmers under the EU's Common
Agricultural Policy, Lithuania will receive around €9.5bn (18.1% of GDP)
in new EU Cohesion and Next Generation EU funds until 2027
including €2.2bn (4.2% of GDP) in grants under the EU's Recovery and
Resilience Facility (RRF). Assuming a multiplier of one, RRF
investment funds will have an accumulated positive effect on growth of
around 2% on GDP until 2026.

Following a very mild contraction of only 0.9% in 2020, Fitch now
forecasts the economy to expand by 4.5% in 2021 and 4.1% in 2022.

40 CE Outlook 2022 www.intellinews.com