Bank of Lithuania Keeps 2026 Growth Forecast at 2.7%
Lithuania's central bank left its 2026 growth forecast unchanged, raised the 2027 outlook and cut the 2028 one. The economy is supported by pension withdrawals, while public debt costs are rising quickly.
The Bank of Lithuania, the country's central bank, kept its forecast for 2026 gross domestic product (GDP) growth at 2.7% in September. It also changed its outlook for the following years: growth in 2027 is now projected at 2.4%, which is 0.4 percentage points higher than before, while the 2028 forecast was lowered by 0.2 percentage points to 3.1%. The information comes from Lithuanian public broadcaster LRT.
Pension withdrawals boost spending
Under a reform, Lithuanian residents may withdraw savings from second-pillar pension plans. By August, about 3.5 billion euros had been transferred to them, and by the end of June around 600 million euros had been spent on consumption. Bank of Lithuania Governor Gediminas Šimkus estimates that about 800 million euros will go into spending this year, raising consumption by 1.3% and GDP by roughly 0.4%. Next year this effect will disappear, and its impact on GDP will turn negative. Swedbank noted that most of the money went on durable goods, though spending on tourism and leisure has risen in recent months.
Unemployment is forecast at 6.7% this year and 6.6% next year. Average wages are expected to grow by 9.4% this year and 7.6% next year. Average inflation is projected at 5.1% this year, 3.1% in 2027 and 2.6% in 2028.
Budget deficit and debt
Prime Minister Mindaugas Sinkevičius allows that next year's budget deficit will exceed 3% of GDP, the limit set by the Maastricht criteria. In his view, without curbing spending growth the country would enter a spiral that would push debt toward 60% of GDP. Lithuania wants to devote at least 5% of GDP to defence.
General government debt stood at 33.3 billion euros, or 39.5% of GDP, at the end of 2025. Debt servicing was allocated 554.3 million euros in 2025, 753.8 million in 2026 and 1.03 billion euros in next year's budget. Šimkus warns that in the longer term growth will have to rely on productivity and competitiveness.
