Press Release No. 25/383

Washington, DC: An International Monetary Fund (IMF) mission, led by Ms. Kazuko Shirono, visited Vilnius during November 17–21, 2025, to meet with the Lithuanian authorities and other stakeholders to discuss recent economic developments, the outlook, and policy priorities. At the end of the visit, the mission issued the following statement:

“Lithuania's economy is expected to grow moderately in 2025, supported by domestic demand. After strong growth in 2024, momentum has been easing due to softening external demand and ongoing trade tensions. In 2026, growth is expected to accelerate, driven by stronger private consumption on the back of anticipated Pillar II pension withdrawals and sustained wage gains, investment supported by EU funds, and a more accommodative monetary policy. Still, risks remain, as weaker-than-expected external demand, particularly from key eurozone partners, and trade uncertainty could weigh on exports and dampen investment.

Headline and core inflation are expected to peak in 2025 before gradually easing and settling above 2 percent over the medium term. After bottoming out at around 0.1 percent y/y in October 2024, headline inflation has rebounded, climbing to 3.7 percent in October 2025, largely reflecting higher excise duties, and food and services inflation. Core inflation remains elevated, primarily due to robust price growth in services, which is in turn driven by substantial wage increases. Recent strong wage growth underscores the need to raise productivity to reduce cost-based price pressures and safeguard competitiveness.

Lithuania’s fiscal position is expected to deteriorate in 2026, with both deficit and debt set to increase due to higher defense and social spending. While the government remains committed to complying with EU fiscal rules—utilizing the national defense clause to permit expanded spending—the proposed budget will place public debt on a rising path. Looking ahead, Lithuania will continue to face fiscal pressures from unfavorable demographic trends, defense needs and green transition. These challenges underscore the need to preserve fiscal space by effectively mobilizing sustainable revenue sources and improving spending efficiency to maintain debt sustainability. Strengthening the financial and social stability of the multi-pillar pension system will be crucial in response to adverse demographic shifts. A comprehensive strategy that incorporates these elements is essential to ensure long-term fiscal sustainability.

Lithuania’s banking sector remains resilient, with capital and liquidity ratios well above regulatory requirements, strong deposit growth, and expanding loan portfolios. Bank profitability remains solid, despite some decline, and asset quality is high, with non-performing loans at historic lows. The non-bank sector is relatively small but has grown, with fintech activities expanding rapidly. In this regard, effective supervision of higher-risk fintech institutions remains a priority. Real estate activity is picking up as lower borrowing costs and wage growth have helped improve affordability, supporting real estate prices. Macroprudential policies should continue to be calibrated in line with evolving financial stability risks and vigilance is warranted given persistent risks from trade tensions and cyber threats.

The mission would like to thank the authorities and other counterparts in Lithuania for the candid discussions and useful exchange of views.”