European Commission predicts an economic decline in the Baltic countries in 2023

According to the European Commission's new forecasts, Latvia is projected to experience a contraction of 0.2% this year, compared to the previous forecast of a 1.4% GDP growth. Next year, Latvia is expected to see a GDP growth of 2.4%. Inflation is anticipated to be 9.3% this year and 3.2% next year.

For Lithuania, the European Commission expects a decline of 0.4% this year and an economic growth of 2.5% in 2024. Inflation in Lithuania is estimated to be 8.8% this year and 2.9% next year.

Estonia is forecasted to see a GDP contraction of 2.6% this year, with a projected GDP growth of 1.9% next year. Inflation is expected to be 9.4% in 2023 and decrease to 3.5% in 2024.

Overall for the European Union, the European Commission anticipates economic growth of 0.6% this year and 1.3% next year. The steepest GDP decline in 2023 is forecasted for Estonia, Ireland (-0.9%), Hungary (-0.7%), and Luxembourg (-0.6%), while the highest growth is expected in Malta (+4%), Croatia (+2.6%), and Greece (+2.4%).

The economic forecasts for Ukraine

The European Commission has significantly improved its forecast for the gross domestic product (GDP) growth of Ukraine in 2023 from 0.6% to 4.8%. The forecast for 2024 has been revised down from 4.0% to 3.7%. A GDP growth of 6.1% is expected in 2025.

In November, the International Monetary Fund (IMF) also raised its forecast for the real GDP growth of Ukraine in 2023 to 4.5% (from the previous range of 1-3%). However, it is expected that in 2024, the growth will decrease to 3-4% as the war continues, and the risks of deteriorating prospects remain exceptionally high.