Economic activity strengthened in 2017, recovering from a slowdown in 2015 and 2016, and remains solid into 2018. Household consumption is supported by falling unemployment, rapid wage increases and favourable credit conditions. After last year's impressive performance on the back of broad based external demand recovery, export growth weakened. Domestic investment rebounded in 2017, largely due to growing business investment in double digits. Knowledge-based investment growth was particularly strong. High capacity utilisation continues to spur private investment, although the investment rate in the business sector is well below its pre-crisis level (Figure 6). Low business confidence may be part of the explanation but other factors, including the difficulties faced by firms in finding adequately-skilled workers, and large informality can also deter investment. As a catching up economy Lithuania needs more investment to boost productivity and close the income gap. …
