Among the risks, the IMF mentioned uneven recovery of the country’s main trade partners, geopolitical tensions, disruptions to the vaccination process and a lagging absorption of the European Union’s (EU) economic recovery funds.
In addition, the Fund’s experts called on Lithuania to implement reforms conducive to productivity growth and address persistent structural problems, in particular in healthcare and education, as this would help maintain the economy’s competitiveness and create conditions for wage growth while helping the country overcome the risk of the middle-income trap.
The recommendations were provided in a report drawn by the Fund’s experts following a remote mission conducted by the IMF in late May and early June, the Bank of Lithuania said in a press release.
At the same time, the Fund’s experts emphasized that Lithuania’s economy had shown resilience in the face of the pandemic crisis and was already demonstrating strong signs of recovery.
According to the IMF experts, Lithuania’s fiscal response to the crisis was timely and well-founded and provided significant support for both households and businesses. This was the reason why the country’s gross domestic product (GDP) contracted by just 0.8 percent in 2020, which was the second-best result across the EU.
The IMF also noted that the Lithuanian banking sector remained well capitalized, liquid and ready to continue to finance the economy.