Lithuania’s Economy: Forecasting a Recession and the Impact on Inflation and Unemployment
Recession in 2023 and GDP Growth in 2024
In the coming year, Lithuania’s economy is expected to face a recession, with an estimated downturn of 0.6%, according to the Bank of Lithuania’s forecasts. This figure is a significant adjustment from the previous projection of a 1.3% contraction. Despite this anticipated recession, the country’s Gross Domestic Product (GDP) is predicted to rebound in 2024 with a 2.1% increase. However, this predicted growth is also an adjustment from the initial forecast in June, which was 0.6% higher.
Inflation and Unemployment Estimates for 2023 and 2024
The Bank of Lithuania went on to share its predictions for inflation and unemployment rates for 2023 and 2024. The annual average inflation is expected to be 8.8% in 2023, declining to 2.6% in the following year. The continuous increase in service prices is likely to contribute significantly to these inflation rates. As for unemployment, the bank estimates it to be 6.7% in 2023, falling slightly to 6.5% in 2024.
Growth of Incomes and Challenges in Certain Sectors
Despite the upcoming economic challenges, the central bank draws attention to the fact that people’s incomes are growing at a faster pace than prices. The nominal income from work has seen a 6.7% rise, while consumer prices have increased by a lesser margin of 1.8%, leading to an actual income increase of 4.8%. On the other hand, sectors such as manufacturing, trade, and real estate development are experiencing slower wage growth, and the number of employees in these sectors is decreasing.
Electricity Prices and Goods Transportation
A drop of 22% was noted in the wholesale electricity prices in Baltic countries in the week of 18-24 September compared to the previous week. The average electricity price was €110.62/MWh in Lithuania and Latvia, and €106.09/MWh in Estonia. Moreover, the transportation of goods in the second quarter of 2023 saw a significant increase, with all types of transport carrying 39.5 million tons in Lithuania, an increase of 11.1% compared to the same period in 2022.
Heating Season and Job Vacancy Rate
According to Lithuania’s Energy Minister, the upcoming heating season will be less costly for residents. He added that gas prices should not see a significant rise unless there is an unexpected event. Finally, the job vacancy rate in Lithuania in the second quarter of 2023 was reported to be 2%, marking a decrease from 3.1% in the previous quarter and 3.2% in the second quarter of 2022, as reported by Eurostat, the statistical office of the European Union.
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