Lithuania's economy shrinks 1% in third quarter as economists warn of slowing growth

Lithuania's economy shrank by 1% in the third quarter of 2026 compared with the previous three months. Among the 15 European Union countries that have published data so far, this is the largest quarterly decline, according to preliminary figures released on Friday by Lithuania's State Data Agency and Eurostat, the EU's statistics office. Economists see the result as a sign that Lithuania's period of fast growth is coming to a close.

Annual growth continues

At the same time, gross domestic product (GDP), adjusted for seasonal and working-day effects, rose 2.3% year over year to 24.4 billion euros at current prices. Without the adjustments, annual growth was 1.8%. The EU average annual rate is 1.5%. In the other countries that have reported, quarterly growth averaged 0.5%, while France's GDP fell 0.1%.

Construction, information and communications, and transportation and storage made the largest negative contributions to GDP.

Economists' explanations

Swedbank economist Nerijus Mačiulis told the news agency BNS that the third quarter is the first warning that rapid growth is over. In his view, the decline was likely linked to the fading of a consumption surge in the second quarter, when residents spent about 1.5 billion euros withdrawn from second-pillar pension funds. Residents are now spending only from their income.

SEB economist Tadas Povilauskas noted that pension withdrawals still supported consumption in the third quarter, but less so: about 745 million euros was paid out in July. Luminor economist Žygimantas Mauricas said the result was surprising, since retail trade and industrial indicators were relatively strong and the housing market remained active. He suggested that stricter employment procedures for workers from third countries and the relocation of some transport companies' operations abroad may have weakened the transport sector.

Forecasts

Economists expect slower growth next year. Swedbank forecasts GDP growth of around 2.8% in 2026, down from its earlier projection of more than 3%, with growth also weakening in 2027. The bank cited the gradual exhaustion of EU recovery funding, slower wage growth, a stagnating labour market, potentially higher European Central Bank interest rates and tougher competition in export markets. The Bank of Lithuania expects growth of about 3% this year and 2.5% in 2027.