The Executive Board of the International Monetary Fund (IMF) completed its Article IV Consultation with the Republic of Lithuania on September 8, 2025. The Lithuanian authorities have agreed to publish the Staff Report prepared for this review.
Lithuania’s economic growth reached 2.7 percent in 2024, primarily due to increased private consumption and real income gains, which helped counterbalance weak investment and net exports. Inflation averaged 0.9 percent in 2024 but rose to 3.1 percent by June 2025, partly because of higher excise duties. Core inflation remained high during this period, driven by persistent services inflation. The labor market saw tightening conditions as migration flows normalized in 2024, with wage growth exceeding 10 percent before easing in early 2025.
The budget deficit increased to 1.3 percent of GDP in 2024 but remained below initial projections due to stronger tax revenues and a surplus in social security funds. Public debt rose to 38.2 percent of GDP that year. Defense spending accounted for 2.8 percent of GDP in 2024 and is set to rise further, reaching an estimated average of five percent from 2026 through 2030 under new NATO commitments.
Recent legislative changes include parliamentary approval of a tax policy package and adjustments to Pillar II pension rules, such as removing automatic enrollment and allowing early withdrawals.
Economic forecasts anticipate growth will reach 2.9 percent in 2025, supported by both private consumption and investment amid ongoing real wage increases and financial support from European Union funds (https://www.imf.org/en/Countries/LTU). Growth could accelerate further to 3.4 percent in 2026 before stabilizing at around 2.5 percent over the medium term.
Inflation is expected to temporarily increase to about 3.2 percent in the coming year before gradually declining.
In its assessment, the IMF Executive Board highlighted Lithuania’s resilience amid challenging external conditions but noted that risks remain tilted downward due to possible slowdowns among trading partners, geopolitical tensions, and demographic challenges.
"Executive Directors commended the Lithuanian economy’s resilience in navigating a challenging external environment supported by strong fundamentals and policy frameworks," according to the summary released by the IMF Executive Board Assessment section.
Directors stressed that macroeconomic stability should be safeguarded while pursuing reforms aimed at sustainable and inclusive growth.
"Directors underscored the need for a comprehensive fiscal strategy to address pressures stemming from the expected increase in defense spending as well as long term expenditure needs related to aging and the green transition," they stated.
While acknowledging recent tax reforms by Lithuanian authorities, Directors generally agreed that additional measures are needed for revenue mobilization and more efficient public spending so that debt remains stable while preserving fiscal flexibility; these efforts should also address inequality issues.
On pension system reforms, Directors cautioned: "Directors emphasized the importance of ensuring the long term sustainability of the pension system and cautioned that the recent Pillar II reform could lower replacement rates and raise future public liabilities."
They recommended further efforts toward both financial stability—such as continued banking sector oversight—and structural reforms targeting productivity improvements through SME financing expansion, technological adoption including AI, vocational training enhancements, migrant labor integration measures, energy security initiatives using renewables, decarbonization steps, and climate adaptation actions consistent with EU targets.
The full staff report will be published soon on www.imf.org/lithuania.