The Bank of Lithuania published the International Monetary Fund’s conclusions from its annual Article IV consultation, which finds Lithuania’s economy resilient to external shocks and expects continued solid growth in 2025 at 2.8% with inflation controlled at 3.1%. The IMF nevertheless flags rising pressures from higher defence spending, deteriorating demographics and labour supply shifts, and calls for faster structural reforms, higher productivity and more sustainable public finance management. With the general government deficit and debt still increasing, the IMF points to the planned rise in defence spending to 5% to 6% of gross domestic product in 2026 to 2030 as a key driver of the need for additional revenue and more efficient public spending. It views tax changes under discussion in the Seimas, including higher progressivity, a review of tax reliefs, and changes to profit and real estate taxation, as moving in the right direction but with limited expected revenue impact, and urges a more progressive personal income tax system, action to close the value added tax collection gap, and stronger spending management across areas such as health, social protection and education. The IMF also warns that proposed changes to second-pillar pension accumulation could materially affect public finances and replacement rates, and calls for careful assessment of social and fiscal consequences, while supporting a stronger multi-pillar pension system. On the financial side, the IMF assesses banks as liquid and well-capitalised, notes recovering credit demand and a more active housing market, and calls for further strengthening of cyber resilience and continued progress on anti-money laundering, particularly as the financial technology sector grows.
Bank of Lithuania 2025-06-06
Bank of Lithuania publishes IMF assessment forecasting 2.8% growth in 2025 and urging stronger fiscal and structural reforms
The Bank of Lithuania released the IMF's Article IV consultation findings, highlighting Lithuania's economic resilience and projected 2.8% growth in 2025 with controlled inflation at 3.1%. The IMF emphasizes the need for structural reforms and sustainable public finance management amid rising defence spending and demographic challenges. It also calls for tax system improvements, careful pension reform assessment, and enhanced financial sector resilience, particularly in cyber security and anti-money laundering.