What will shape tomorrow’s GDP? Experts see clear trends

Long the backbone of the Lithuanian economy, industry is facing serious challenges. Slowing exports, rising energy and logistics costs, structural constraints, and a shortage of highly skilled workers raise questions about the sector’s continued role in driving GDP growth.

The growth trajectory is less clear
Alexander Izgorodin, an economist at Citadele Bank, says that while the start of the year was successful, the future outlook has become more cautious:

“Exports to Germany are not growing. Eurozone GDP may slow down again. Lithuanian consumers’ optimism has been dampened by tax reform and tariff uncertainty,” Izgorodin comments.

Industry still accounts for around a fifth of the country’s GDP, but rising labor costs could cause manufacturing to lose its competitive edge. Izgorodin predicts that the services sector will grow in importance over time and that the rapid growth seen after EU accession should no longer be expected.

“The key today is stable, measured growth and preparing for a structural transformation of the economy.”

The industry needs an environment that supports growth
Egidijus Mockus, the managing director of VMGcorp, draws attention to rising production costs in Lithuania. He says that high electricity prices, logistics costs, and limited availability of capital reduce companies’ ability to compete in the global market.

“Without competitive infrastructure and talent retention, manufacturing growth stagnates. Labor taxation is becoming too high, which encourages the migration of highly skilled workers,” Mockus says.

He stresses that technological investment alone is not enough — the tax and investment environment is also important. To be independent of external factors, the VMG Group has invested in modernizing its production for several years, culminating in the opening of the VMG Technics R&D Park last year. This innovation park is dedicated to developing robotics and artificial intelligence solutions.

Direction is more important than pace
According to Vidmantas Janulevičius, president of the Lithuanian Confederation of Industrialists, industry must remain competitive and move toward higher added value.

“The manufacturing industry and related sectors generate up to 59% of GDP. This is a significant portion. However, without transferring innovations from scientific laboratories to actual production, there will be no breakthrough,” says Janulevičius.
He believes that rising geopolitical tensions, possible US tariffs on European products, and dumping from Asian markets could negatively impact Lithuanian exporters. He believes the solution is to invest in productivity and automation, but this requires a stable and favorable tax environment.