The National Audit Office of Lithuania implementing the function of the fiscal institution (NAO FI) has assessed the economic development scenario for 2023-2026 published by the Ministry of Finance on 11 September.
According to the assessment of NAO FI, the growth of Lithuania's real GDP in the second quarter of 2023 allowed to mitigate the projected economic contraction in 2023 compared to the June scenario. In the background of geopolitical tensions and the tightening of monetary policy due to high inflation, global economic developments remain uncertain, resulting in a cautious assessment of Lithuania’s growth prospects in 2024.
“On the one hand, a strong recovery in Lithuania's real exports of goods and services in 2024 is not expected due to the projected sluggish external demand, while on the other hand, real GDP growth should be supported by investment and a strong labour market. We consider the projected moderate economic growth in 2024 to be plausible. Since the opinions on the economic prospects have no significant differences, we endorse the economic development scenario for 2023-2026," said Jurga Rukšėnaitė, Head of the Budget Monitoring Department.
For the first time, the NAO FI is also publishing its macroeconomic forecasts together with the opinion on the endorsement of the economic development scenario. These forecasts, along with other elements of the analysis, help the NAO FI to assess the scenario and take a decision on endorsement.
“The OECD is delighted to see the Budget Monitoring Department starting to publish its macroeconomic forecast alongside its endorsement of the economic development scenario. This aligns with good practice across peer institutions in the OECD and will further enhance the institution’s transparency and credibility." said Scherie Nicol, representative of the OECD. Together with other foreign and Lithuanian experts of the OECD, she conducted the first external review of the National Audit Office implementing the functions of the fiscal institution in 2019, where publication of macroeconomic forecasts was one of the recommendations made.
With Lithuania's economic development remaining relatively stable, anticipating more balanced risks from energy prices and falling inflation, large-scale support measures should no longer be used. Moreover, starting in 2024, EU Member States will need to return to common fiscal discipline rules. In the absence of evidence at the time of endorsement of economic development scenario that grounds for the application of exceptional circumstances persist in Lithuania, the NAO FI believes that all national fiscal discipline rules should be invoked. With the economy remaining below its potential level in the coming years and without applying exceptional circumstances, general government deficits could be generated up to the extent allowed by fiscal discipline rules.