Lithuania’s central bank warns about economic restraints in 2020

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Lithuania’s central bank kept the country’s GDP growth projection for the next year unchanged in its report published on Wednesday, yet repeatedly warned about certain restraints for the economic development in 2020.

The Bank of Lithuania projected that after a 3.7-percent growth of the country’s economy in 2019, next year it will increase by 2.5 percent, unchanged from the projections made in September this year.

“As this year comes to an end, we can celebrate the fact that in 2019 there was a strong growth in the country’s economy; however, looking to the coming year we should be more restrained as a slowdown in economic development is being projected,” Gediminas Simkus, head of the Economics and Financial Stability Service at the Bank of Lithuania, was quoted as saying in a statement released by the bank.

Lithuania’s export and investment should grow at a more moderate pace next year and the conditions for export expansion “are not the best”, said Simkus.

The central bank noted that the changing labor market situation will also limit economic activity. Companies have less room to significantly increase wages, while hiring of new employees will be adversely affected by domestic demographic changes, the bank said.

According to the latest projections of the bank, wages in Lithuania this year will rise by 8.5 percent, while next year by 6.7 percent.

The central bank increased its inflation projection for the next year by 0.1 percentage point and now expects that inflation will amount to 2.3 percent both in 2019 and 2020.

Lithuania’s Ministry of Finance expects the country’s GDP to expand by 2.4 percent in 2020, while average annual inflation should amount to 2.3 percent, according to the ministry’s projections published back in September.

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