IMF Executive Board Concludes 2026 Article IV Consultation with Republic of Lithuania
IMF News, July 29, 2026
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- Published: July 29, 2026
Growth outlook and inflation
- Growth remained steady at 2.9 percent in 2025, driven by domestic demand and inventory accumulation.
- Growth is projected at 2.8 percent in 2026.
- Growth is projected to decelerate to 2.2 percent in 2027 before strengthening in 2028 with the second wave of Pillar II pension withdrawals.
- Inflation remained elevated at 3.4 percent in 2025 and rose to 5.1 percent in May 2026, mainly on higher energy prices.
- Inflation is expected to rise further on energy and tax effects and robust demand, before easing over the medium term.
- Risks are tilted to the downside: geopolitical uncertainty, energy price volatility, and the potential for stronger-than-expected domestic demand.
Fiscal stance, debt, and recommended medium-term strategy
- Fiscal policy was expansionary in 2025—despite a smaller-than-budgeted deficit at 1.8 percent of GDP—reflecting stronger‑than‑expected revenues and some underutilization of spending.
- Public debt rose to 39.5 percent of GDP in 2025.
- The national fiscal rule was amended to align with European Union fiscal rule, shifting the target from a balanced structural balance to net expenditure growth, while aiming for a structural deficit below 1 percent when not in excess deficit procedure.
- Without action, government debt is projected to rise rapidly to 60 percent of GDP by 2033.
- A tighter fiscal stance is warranted already in 2026—saving revenue overperformance and limiting energy support to targeted, temporary measures.
- Recommended consolidation measures (emphasizing permanent revenue measures):
- Broadening and increasing property taxation.
- Enhancing personal income tax progressivity.
- Reducing inefficient exemptions.
- Improving VAT compliance.
- Complement these with spending reprioritization and efficiency gains, including containing public wage bill growth, better targeting social benefits, and improving efficiency in health and education.
- Strengthening the fiscal council’s independence and mandate would further support fiscal discipline.
Pensions and social policy
- The recent weakening of Pillar II pension calls for a comprehensive reassessment of the multi-pillar pension system while ensuring near-term stability.
- Recent changes will lower replacement rates and raise future fiscal costs.
- Near-term focus: preserve existing Pillar I buffers and maintain state contributions to Pillar II to preserve participation incentives.
- Ultimately, a comprehensive assessment is needed to reinforce Pillar II and better align it with European best practices.
Financial sector and macroprudential policy
- Credit to firms and households has accelerated, supporting buoyant housing activity and contributing to a moderate but widening house price misalignment; vulnerabilities persist in commercial real estate.
- Systemic risks remain contained on the back of strong bank fundamentals.
- Changes to borrower-based measures planned in August 2026 could add to already strong credit and house price dynamics, particularly amid robust wage growth and additional liquidity from Pillar II withdrawals—warranting readiness to tighten if risks intensify.
- Evolving risks—particularly cyber and financial integrity risks linked to fintech and virtual assets—call for continued supervisory vigilance and enhanced AML/CFT oversight.
- Macroprudential policy should stay vigilant and ready to act if vulnerabilities build up further.
Structural reforms to raise productivity and investment
- Growth should transition away from demand stimulus toward durable drivers: productivity gains and investment.
- Structural constraints: low capital stock, persistently high unemployment with large regional variations, population aging, skills mismatches and shortages, and regional labor‑market and productivity disparities.
- Priorities to address labor constraints:
- Align education and training with labor market needs.
- Scale-up reskilling and active labor market policies.
- Strengthen vocational training.
- Better target social benefits to preserve work incentives.
- Streamline entry procedures and integration support for foreign workers.
- Ease mobility frictions through better connectivity and expanded supply of quality, affordable housing.
- Priorities to raise investment and deepen capital markets:
- Broaden non-bank financing through stronger investor participation and alternative instruments.
- Complement Baltic capital market harmonization with further progress toward the EU single market.
- ILTE can help fill remaining gaps but requires stronger governance and oversight to ensure sound risk management and avoid crowding out private finance.
- Productivity and competitiveness measures:
- Faster digital adoption, wider AI uptake, and greater access to R&D support.
- Further investment in renewables, storage and grids.
- Shift to low-emission transport including rail‑electrification and faster EV uptake to reduce energy dependence.
External position
- The external position is broadly in line with the level implied by fundamentals and desirable policies.
- The current account weakened in 2025 but remained in surplus and close to its norm; it is expected to turn modestly negative in the coming years before recovering.
- Fiscal consolidation and structural reforms to support productivity and attract investment will help sustain external balance over the medium term.
Key projections and selected indicators (2023–31, as presented)
- Real GDP: 0.8 (2023); 3.0 (2024); 2.9 (2025); 2.8 (2026); 2.2 (2027); 2.6 (2028); 2.5 (2029); 2.4 (2030); 2.4 (2031)
- Domestic demand: -0.9 (2023); 5.9 (2024); 4.5 (2025); 1.0 (2026); 1.6 (2027)
- Private consumption: -0.1 (2023); 3.3 (2024); 2.0 (2025); 3.9 (2026); -1.2 (2027); 3.1 (2028); 1.2 (2029)
- Domestic fixed investment: 11.3 (2023); -1.5 (2024); 7.9 (2025); 6.7 (2026); 6.1 (2027); 3.6 (2028); 4.6 (2029); 4.4 (2030)
- Inventories (contribution to growth): -3.4 (2023); 2.3 (2024); 0.3 (2025); 0.0 (2026)
- Net external demand (contribution to growth): 1.5 (2023); -2.8 (2024); 1.4 (2025); -0.3 (2026)
- Nominal GDP (in billions of euro): 74.3 (2023); 79.0 (2024); 84.3 (2025); 89.7 (2026); 94.1 (2027); 99.6 (2028); 104.3 (2029); 109.4 (2030); 114.8 (2031)
- Output gap (percent of potential GDP): -0.4 (2023); 0.1 (2024); 0.4 (2025); 0.5 (2026)
- Unemployment rate (year average, in percent of labor force): 6.9 (2023); 7.1 (2024); 6.8 (2025); 6.6 (2026); 6.4 (2027); 6.2 (2028); 6.0 (2029)
- Average monthly gross earnings: 12.2 (2023); 10.4 (2024); 8.4 (2025); 8.8 (2026); 5.6 (2027); 5.2 (2028); 5.1 (2029); 5.0 (2030)
- Average monthly gross earnings, real (CPI-deflated): 3.5 (2023); 9.6 (2024); 4.9 (2025); 2.7 (2026)
- Labor productivity: -0.6 (2023)
- HICP, period average: 8.7 (2023); 0.9 (2024); 3.4 (2025)
- HICP core, period average: 10.7 (2023); 3.7 (2024); 3.2 (2025)
- HICP, end of period: 1.9 (2023); 6.3 (2024)
- GDP deflator: 9.9 (2023)
- Fiscal balance (percent of GDP): -0.7 (2023); -1.3 (2024); -1.8 (2025); -2.3 (2026); -3.8 (2027); -4.0 (2028); -4.3 (2029)
- Structural fiscal balance (percent of potential GDP): -2.0 (2023); -2.5 (2024)
- Revenue (percent of GDP): 36.5 (2023); 38.1 (2024); 39.4 (2025); 40.4 (2026); 40.6 (2027); 40.3 (2028); 40.2 (2029)
- Of which EU grants: 0.7 (year unspecified)
- Expenditure (percent of GDP): 37.2 (2023); 41.2 (2024); 42.7 (2025); 43.4 (2026); 43.7 (2027); 44.0 (2028); 44.3 (2029); 44.5 (2030)
- Of which: Non-interest (percent of GDP): 36.6 (2023); 38.6 (2024); 41.5 (2025); 42.1 (2026); 42.2 (2027); 42.5 (2028); 42.6 (2029); 42.8 (2030)
- Interest (percent of GDP): 0.6 (2023); 1.3 (2024); 1.7 (2025)
- General government gross debt (percent of GDP): 37.1 (2023); 38.0 (2024); 39.5 (2025); 44.9 (2026); 48.9 (2027); 50.9 (2028); 53.9 (2029); 55.7 (2030); 57.4 (2031)
- Current account balance (percent of GDP): 1.1 (2023); -1.1 (2024); -0.5 (2025)
- Current account balance (billions of euros): -1.0 (year unspecified)
- Saving-investment balance (percent of GDP): (data column header present but specific values not listed)
- Gross national saving (percent of GDP): 23.8 (2023); 23.2 (2024); 22.1 (2025); 23.5 (2026); 24.1 (2027); 25.0 (2028); 25.7 (2029); 26.2 (2030)
- Gross national investment (percent of GDP): 22.7 (2023); 20.6 (2024); 22.3 (2025); 23.3 (2026); 24.0 (2027); 24.4 (2028); 24.8 (2029); 25.2 (2030)
- Foreign net savings: -3.2 (year unspecified)
IMF Communications Department, Press Release No. 26/264, July 29, 2026.