The Lithuanian economy will post robust growth over our short-termoutlook to 2019, buoyed by a strong consumer sector and improvinginvestment climate. Rising inflation will add some headwinds afterthe economy posted strong Q117 headline growth, but won't suppressa notable acceleration in real GDP growth over the comingtwo years.
Tensions neighbouring Russia will continue to pose the largest threatto investor interests in Lithuania over the coming months. While wedo not expect an outright conflict between the two states, the threatof Russian military intervention will keep defence spending a keypriority of Lithuania's fiscal policy and encourage closer relationswith the rest of the EU.
Major Forecast Changes
We have revised up our forecasts for real GDP growth in 2017, from2.8% to 3.5% on the back of stronger-than-expected Q1 data.