Luminor Bank economist Peteris Strautins said Lithuania is set to lead the Baltic growth this year with 3.6%, while Estonia is forecast to expand by 2% and Latvia by 2.5%.

The outlook suggests a gradual recovery across the region following recent economic weakness.

Further ahead, growth is expected to strengthen in 2027. Latvia’s GDP is projected to rise by 3.2%, Estonia’s by 3%, while Lithuania’s growth is forecast to moderate to 2.4%.

However, Strautins cautioned that the projections were made before escalating tensions in the Middle East. Prolonged disruption to shipping through the Strait of Hormuz could weigh on the outlook. In a downside scenario, Latvia’s growth could slow to 1.8% this year and 2.5% in 2027.

Inflation across the Baltics is expected to remain contained but uneven. In 2026, consumer prices are forecast to rise by 3.7% in Latvia, 3% in Estonia and 5% in Lithuania. By 2027, inflation is seen easing to around 2% in Estonia and Latvia, and 3% in Lithuania. Under a more adverse scenario, inflation in Latvia could reach 4% this year before dropping to 1.8% in 2027.

Labour market conditions are expected to remain relatively stable. Unemployment in 2026 is projected at 6.8% in both Latvia and Lithuania, and around 6% in Estonia. By 2027, the rate is forecast to edge down to 6.5% in Latvia and 6% in Estonia, while rising slightly to 7% in Lithuania.

Wage growth is expected to stay robust, particularly in Lithuania. Salaries in Latvia are projected to increase by 6.5% this year, compared with 8% in Lithuania and 5% in Estonia. In 2027, growth is expected to moderate to 5.8% in Latvia, 7% in Lithuania and 5% in Estonia.

Overall, the forecasts point to cautious optimism – with steady growth underpinned by domestic demand but exposed to geopolitical uncertainty.