Economic growth ebbs in the third quarter of 2025

Economy hits a bump in the road: GDP grew 2.1% in annual terms in Q3, following a 3.2% expansion in the previous quarter. Q3's reading was the weakest since Q2 2024. In seasonally adjusted quarter-on-quarter terms, GDP flatlined in Q3, following 0.6% growth in the previous quarter.

Momentum decelerates across the board: Relative to the previous quarter's data, readings in Q3 worsened for private consumption (+1.8% on a year-on-year basis vs +3.0% in Q2), government consumption (+1.0% vs +1.7% in Q2), fixed investment (+8.0% vs +8.8% in Q2) and exports of goods and services (+2.8% vs +4.3% in Q2). In contrast, the reading for imports of goods and services improved in Q3 (+7.4% vs +7.3% in Q2). Household spending was likely hurt by uncertainty arising from the government’s collapse in August and rising consumer price inflation, which squeezed real wages. Moreover, goods exports swung into decline and hit a three-quarter low, as the boost from pre-tariff export frontloading faded.

Economy to regain speed in 2026: Looking ahead, our panelists expect annual GDP growth to end 2025 on a weaker note than in 2024 but to gradually pick up pace through the end of next year. In 2026, lower inflation, healthy wage growth and a tighter labor market should boost private spending, while an expansionary fiscal stance linked to higher defense spending should provide a tailwind to investment. Softer-than-expected EU demand is a key downside risk to GDP growth.

Panelist insight: EIU analysts commented on the outlook: “The slowdown in the third quarter is sufficient for us to revise down our estimate for 2025 as a whole, but we do not expect it to represent the beginning of a slump. There are some indications that inflation is beginning to ease (even as the year-on-year figure picked up in October, prices fell in monthly terms in September and October), and the imminent surge in defence-related spending will also put a floor under economic growth. We have also recently revised up our forecast for the US economy and lowered our forecast for the global oil price in 2026, both of which should prove beneficial to Lithuania.”

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