Republic of Lithuania: 2024 Article IV Consultation-Press Release; and Staff Report

IMF Staff Country Reports, July 24, 2024

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Lithuania has experienced fast income convergence over the past two decades.
The economy is projected to return to growth this year after a shallow recession.
Higher inflation differentials following the shock triggered by Russia’s invasion of Ukraine have had an impact on competitiveness, even though Lithuania entered this crisis with an undervalued real effective exchange rate.
Global fragmentation, long-term spending pressures, eroded corporate profitability, and pre-existing structural challenges in education, healthcare and the labor market continue weighing on productivity and growth.
Conclusion: Lithuania needs prudent policies and decisive structural reforms to support sustained productivity growth and ensure higher living standards and continued convergence.

Impact of higher inflation differentials on competitiveness.
Global fragmentation affecting external conditions.
Long-term spending pressures on fiscal sustainability.
Eroded corporate profitability constraining investment.
Structural challenges in education, healthcare, and the labor market limiting productivity.

Implement prudent macroeconomic policies to navigate short-term shocks and support return to growth.
Pursue decisive structural reforms focused on productivity-enhancing measures in education, healthcare, and the labor market.
Address fiscal vulnerabilities from long-term spending pressures to preserve fiscal sustainability.
Support measures to restore and enhance competitiveness in light of inflation differentials and external shocks.