Lithuania’s working-day and seasonally adjusted GDP growth in Q1/14 amounted to 3% y/y, according to the second revised estimate by Statistics Lithuania. The GDP growth was revised upwards from previous 2.9% y/y estimate. In q/q terms GDP increased by 0.6%.

GDP at current prices in Q1 stood at LTL 27.7bn (EUR 8.03bn). GDP growth in the first three months of 2014 was mostly supported by domestic demand driven sectors such as construction and trade, as well as manufacturing. 

In 2013 and 2012 Lithuania’s GDP growth was 3.5% vs. 6.2% growth in 2011 and 1.5% in 2010. In Q4/13 economic growth was 3.4% y/y.

In the end of May, DNB Bankas revised Lithuania’s GDP growth forecast for 2014 from previous 3.5% to 3%. In 2015 economic growth is expected at 3%, accelerating to 4% in 2016. The outlook is revised due to geopolitical uncertainty around Ukrainian-Russian conflict. While given the stable inflation environment even 3% is seen as strong performance, Ukraine-Russia situation offers a chance to diversify export markets for Lithuanian companies.

Previously the Bank of Lithuania has revised the GDP forecast for 2014 downwards from 3.6% to 3.3% for 2014 and from 3.8% to 3.6% in 2015. The downwards adjustment was attributed to weaker-than-expected exports outlook. At the same time, the CB expects Lithuania’s economy to be among the fastest growing in EU due to robust domestic demand. The outlook is conditioned by possible escalation of the conflict between Russia and Ukraine. Slowdown in Russia and effects of the political crisis in the Ukraine are already negatively influencing the outlook of the central bank.