IMF Executive Board Concludes 2025 Article IV Consultation with Republic of Lithuania
IMF News, September 17, 2025
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- Published: September 17, 2025
Overview
- On September 8, 2025, the Executive Board completed the Article IV Consultation for the Republic of Lithuania. The authorities consented to publication of the Staff Report prepared for this consultation.
- Press Release No. 25/299.
Recent economic developments
- Growth accelerated to 2.7 percent in 2024, largely driven by private consumption supported by real income gains, offsetting weak investment and net exports.
- Inflation averaged 0.9 percent in 2024, partly driven by negative base effects from declining energy prices; inflation increased to 3.1 percent in June 2025, partly reflecting increased excise duties.
- Core inflation remained high in 2024 and the first half of 2025, reflecting persistently high services inflation.
- Labor market: migration flows eased to normalize in 2024; wage growth remained above 10 percent in 2024 due to increased public wages but markedly eased in Q1 2025.
- Defense expenditure reached 2.8 percent of GDP in 2024 and is expected to rise to 5 percent of GDP for 2026-30 in line with new NATO commitments.
- Parliament approved a tax policy package and proposed changes in the Pillar II pension including removing automatic enrollment and introducing options to withdraw funds before retirement age.
Outlook and projections
- Growth projections:
- 2025: 2.9 percent (supported by private consumption and investment, against lower yet continued real wage growth, easing financial conditions, and EU funds).
- 2026: 3.4 percent (largely reflecting increased private consumption driven by anticipated withdrawals from the Pillar II pension).
- Medium-term convergence to 2.5 percent.
- Inflation:
- Expected to temporarily rise to 3.2 percent in 2025, before gradually moderating.
Fiscal position and public debt
- Budget deficit increased to 1.3 percent of GDP in 2024 but was lower than originally planned, driven by higher surplus of social security funds, stronger-than-expected tax revenues, and lower expenditure on goods and services.
- Public debt rose to 38.2 percent of GDP in 2024.
- IMF staff emphasize the need for further fiscal adjustments to stabilize the debt ratio at a lower level and preserve fiscal space against future shocks.
- Pension sustainability: ensuring long-term sustainability of the pension system is essential; staff cautioned that the recent Pillar II reform could lower replacement rates and raise future public liabilities.
Financial sector and macroprudential stance
- Banking system: solid capitalization, ample liquidity, and low NPL ratios.
- Macroprudential stance considered appropriate, but continued vigilance needed on credit growth, house price dynamics, and commercial real estate risks; readiness to adjust capital-based measures encouraged.
- AML/CFT: strengthening of the AML/CFT framework welcomed; sustained implementation encouraged, including supervision of fintech and virtual asset service providers.
- Development of domestic capital markets encouraged to facilitate investment growth and help reduce external imbalances.
Structural reforms and labor market policies
- Priority reforms:
- Improve firms’ access to finance to facilitate investments and deepen SME financing.
- Accelerate adoption of new technologies and AI, and accelerate technological diffusion.
- Address skills mismatches through improved vocational training and migrant labor integration.
- Energy and climate:
- Progress in strengthening energy security through renewables welcomed; continued decarbonization and climate adaptation efforts encouraged to meet EU climate goals.
Executive Board assessment and recommendations
- Directors commended Lithuania’s resilience supported by strong fundamentals and policy frameworks but noted downside risks from potential slowdowns in trade partners, geopolitical tensions, and demographic pressures.
- Fiscal strategy: comprehensive approach needed to address defense spending increases and long-term expenditure needs related to aging and the green transition.
- Revenue and spending: additional revenue mobilization measures and spending efficiency gains broadly agreed as needed to stabilize debt and preserve fiscal space; measures to address high inequality encouraged.
- Pension reform caution: design reforms to ensure both financial and social sustainability.
- Financial oversight: continue close oversight of the banking sector and sustain AML/CFT implementation.
- Structural policies: support for measures to raise productivity and alleviate skills mismatches, deepen SME financing, and foster technological diffusion.
Key statistics (selected)
- Real GDP growth: 2022: 2.5; 2023: 0.4; 2024: 2.7; 2025: 2.9; 2026: 3.4; medium-term: 2.5.
- Domestic demand growth: 2022: 2.3; 2023: -1.3; 2024: 3.1; 2025: 3.3; 2026: 3.7.
- Private consumption: 2022: 2.0; 2023: -0.3; 2024: 3.6.
- Domestic fixed investment: 2022: 5.2; 2023: 9.3; 2024: -1.1; 2025: 5.0; 2026: 5.3; 2027: 4.7; 2028: 4.6; 2029: 4.5.
- Nominal GDP (in billions of euros): 2022: 67.4; 2023: 73.8; 2024: 78.4; 2025: 83.9; 2026: 88.9; 2027: 92.8; 2028: 97.4; 2029: 102.4; 2030: 107.5.
- Output gap (percent of potential GDP): 2022: -0.7; 2023: -0.5; 2024: 0.8.
- Unemployment rate (year average, in percent of labor force): 2022: 6.0; 2023: 6.9; 2024: 7.1; 2025: 6.6; 2026: 6.1; 2027: 5.9.
- Average monthly gross earnings: 2022: 13.3; 2023: 12.2; 2024: 10.4; 2025: 8.1; 2026: 5.8; 2027: 5.4.
- Average monthly gross earnings, real (CPI-deflated): 2022: -4.6; 2023: 3.5; 2024: 9.6; 2025: 4.9; 2026: 2.8.
- Labor productivity: 2022: -1.0; 2023: 1.1; 2024: 2.4.
- HICP, period average: 2022: 18.9; 2023: 8.7; 2024: 0.9; 2025: 3.2.
- HICP core, period average: 2022: 13.6; 2023: 10.7; 2024: 3.0.
- HICP, end of period: 2022: 20.0; 2023: 1.6; 2024: 1.9.
- GDP deflator: 2022: 16.1; 2023: 9.0; 2024: 3.9.
- General government fiscal balance (percent of GDP): 2022: -2.8; 2023: -4.1; 2024: -3.9; 2025: -4.0.
- Structural fiscal balance (percent of potential GDP): 2022: -1.5; 2023: -2.7; 2024: -4.4.
- Revenue (percent of GDP): 2022: 35.5; 2023: 36.7; 2024: 38.2; 2025: 38.3; 2026: 38.1; 2027: 38.4.
- Expenditure (percent of GDP): 2022: 36.3; 2023: 37.4; 2024: 39.5; 2025: 41.1; 2026: 42.2; 2027: 42.1; 2028: 42.4; 2029: 42.3.
- General government gross debt: 2022: 37.3; 2023: 46.5; 2024: 50.2; 2025: 52.3; 2026: 54.2; 2027: 55.9.
- Current account balance (percent of GDP): 2022: -6.1; 2023: 1.8.
- Gross national saving (percent of GDP): 2022: 22.0; 2023: 23.1; 2024: 22.8; 2025: 23.0; 2026: 23.3; 2027: 23.8; 2028: 24.4; 2029: 25.0; 2030: 25.4.
- Gross national investment (percent of GDP): 2022: 28.1; 2023: 20.4; 2024: 21.0; 2025: 21.3; 2026: 22.5; 2027: 23.6.
Source: IMF Executive Board Concluding Statement on the 2025 Article IV Consultation with the Republic of Lithuania (Press Release No. 25/299).