Despite the impact of the conflict in the Middle East on energy prices, the bank’s analysts expect household income growth to outpace energy price increases.
As in the January review, the country’s economy is projected to grow by 2.1% in 2027, while inflation, according to the latest forecasts, will fall to 3.5%.
According to analysts, food inflation, which declined in the first quarter, may rise again in the second half of the year.
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SEB analysts say that higher-than-expected withdrawals from pension funds will offset the negative impact of rising energy prices.
The bank had previously projected that 35% of second-pillar funds would be withdrawn by the end of 2027 following the reform; however, data show that 40% of fund assets were withdrawn in the first three months of the year alone.
The bank now forecasts that residents will withdraw 50% of the funds by the end of the year, with half spent on consumption.
Export volumes are expected to grow by 2.2% this year and 3.1% next year (January forecasts: 3.3% and 3.1%, respectively).
According to SEB, goods exports are still under pressure due to higher U.S. import tariffs, with export volumes to that country having fallen by nearly 50%.
Although the number of employees is declining, exports of information technology, financial, and other business services are growing; however, this trend, according to SEB, is unfavourable for the commercial office space market, as evidenced by the high number of vacant spaces.
The country’s industrial production, which continues to grow, still lags behind the services sector, with growth constrained by rapidly rising labour costs, a shortage of skilled workers, and high energy prices.
The analysts claim that the expanding defence sector is playing an increasingly significant role in the country’s economy.
The unemployment rate in Lithuania is projected to be 6.8% both this year and next year (6.8% in January and 6.7% in the forecast), while wage forecasts remain unchanged from January—growth is projected at 7.7% and 7%, respectively.