Lithuania has a population of 2.8 million. It belongs to the group of high-income countries. It has been a EU member since 2004 and Lithuania joined the Eurozone in 2015.
Eurozone membership has provided a cushion against former capital flows reversals. It helped to stabilize growth and favoured convergence towards EU average income. Lithuania has run small fiscal surpluses during the years before the Covid crisis. Along with nominal GDP growth, it has helped to lower public debt. It gave the leeway to run a sizeable fiscal stimulus. ECB’s monetary policy was also expansionary. As a result, Lithuania has experienced the lower output loss in the Eurozone (-1.3% in 2020). However, as the economy is running at full capacity, inflation has accelerated. Any inflation differential may erode competitiveness compared to Central European peers with their own currency.
