Lithuania: GDP falls in Q2 for the first time in over a decade
GDP plunged 3.7% year-on-year in the second quarter, contrasting the first quarter’s 2.4% expansion and marking the sharpest contraction since Q4 2009, according to preliminary data released by Statistics Lithuania on 30 July. Meanwhile, the economy shrank 5.1% in seasonally-adjusted, quarter-on-quarter terms in the second quarter (Q1 2020: -0.3% s.a. qoq), the sharpest drop since Q1 2009.
The unprecedented fallout from Covid-19 drove the contraction as the full brunt of lockdown measures adopted by the government to contain the pandemic was felt. The broad-based downturn was spearheaded by shrinking activity in the wholesale and retail trade, transport and storage, and accommodation and food service sectors. Similarly, manufacturing output dived significantly in the second quarter. In terms of expenditure, although data has not yet been released, the pandemic will have dented consumer spending and investment activity, and likely dealt a massive blow to the external sector.
GDP is set to shrink this year as the pandemic takes its toll on both domestic demand and the external sector. Shrinking fixed investment and private consumption are set to drive the downturn in domestic demand, while the external sector reels from vanished foreign demand and compromised trade links. On a more positive note, sturdier government spending and rising inflows from EU structural funds should soften the downturn somewhat. Furthermore, the economy seems to have held up reasonably well in the broader EU context, thus hinting at the Lithuanian economy’s resilience to the Covid-19-induced shock thus far.