TVF Maintains Lithuania GDP Growth Forecasts, Predicts Faster Inflation

The International Monetary Fund (IMF) has maintained its GDP growth projections for Lithuania, according to reporting by Lietuvos Aidas, although inflation is now expected to accelerate. This outlook comes as the broader Eurozone faces significant price pressures driven by an energy shock.

The projected increase in inflation follows a sharp rise in consumer prices across the Eurozone. On March 31, 2026, reports indicated that Eurozone annual inflation surged to 2.5% in March, up from 1.9% in February. This spike was driven almost entirely by the conflict in Iran and the near-total closure of the Strait of Hormuz, which sent energy prices spiraling.

Energy Market Volatility

The geopolitical situation in Iran has had an immediate impact on global commodity markets. Brent crude oil has risen above $110 per barrel, while European natural gas prices have climbed approximately 80% year-to-date. In March 2026, energy inflation in the Eurozone surged to 4.9% year-on-year, representing a turnaround of nearly 8 percentage points in a single month.

While core inflation—which excludes energy, food, alcohol, and tobacco—actually declined to 2.3% from 2.4% in the same period, the energy shock has reshaped the immediate inflationary environment for member states, including Lithuania.

GDP Growth and Economic Drivers

Despite the inflationary pressures, Lithuania’s economic activity is expected to continue growing. Data shows that Lithuania’s Gross Domestic Product (GDP) expanded by 1.70% in the fourth quarter of 2025 over the previous quarter.

The economy is projected to grow by 2.7% in 2025, 3.0% in 2026, and 2.1% in 2027. This growth is supported by several key factors:

• Private Consumption: Growth is being driven by increasing wages and the release of second pillar pensions. A pension reform making the second pillar voluntary is projected to boost consumption growth up to 5% in 2026, before declining to 2.1% in 2027.
• Investment: Investment is projected to recover, supported by the Recovery and Resilience Facility (RRF) and the necessity to increase defense spending. Investments are expected to increase by 5.1% in 2025 and 4% in both 2026 and 2027.
• Borrowing Costs: Lower borrowing costs are expected to play a major role in supporting growth throughout the second half of 2025.

Fiscal Outlook and Inflation Forecasts

Before the recent energy shock, inflation in Lithuania was expected to rise to 3.4% in 2025, driven by food and services prices, before easing to 2.9% in 2026 due to lower energy prices. For 2027, inflation was projected at 2.4%, with energy prices expected to rise due to the introduction of ETS2.

The general government deficit is projected to increase over the next three years. Forecasts place the deficit at 2.2% in 2025, increasing to 2.6% in 2026, and reaching 2.7% in 2027.

Other key economic indicators for the forecast horizon include:

• Unemployment: Projected at 7.1% in 2025, falling to 6.8% in 2026 and remaining at 6.8% in 2027.
• Gross Public Debt: Expected to rise from 39.8% of GDP in 2025 to 44.7% in 2026 and 48.2% in 2027.
• Current Account Balance: Projected at 1.5% of GDP in 2025, 1.1% in 2026, and 1.3% in 2027.

The saving rate for disposable income is expected to remain high, ranging between 11.4% and 12.8%.