⚡️European Commission releases 2025–2027 outlook for Baltic economies

The European Commission publishes its Autumn 2025 macroeconomic forecast for Latvia, Estonia and Lithuania. The outlook shows moderate GDP growth across all three countries, driven by private consumption, investment and recovering exports. Latvia is expected to grow by 1.0% in 2025, Estonia by 0.6% and Lithuania by 2.4%. Inflation is projected at 3.6% in Latvia, 4.8% in Estonia and 3.4% in Lithuania next year. All three governments plan higher defence expenditure, contributing to wider deficits during the forecast horizon.

Latvia’s GDP growth is forecast to reach 1.7% in 2026 and 1.9% in 2027, with inflation easing to 2.2% in 2026. Estonia is projected to grow by 2.1% in 2026 and 2.0% in 2027, while inflation is set to fall to 2.2% by 2027. Lithuania is expected to expand by 3.0% in 2026 and 2.2% in 2027, with inflation gradually declining to 2.7%. Unemployment rates across the region are projected between 6.5% and 7.6% in 2025. Public debt levels remain highest in Latvia and Lithuania, while Estonia maintains the lowest ratio in the EU.

Context:

The new forecast outlines the trajectory for Baltic economies amid higher defence budgets, shifts in private consumption and the gradual normalisation of inflation. The estimates show a return to steady — though uneven — growth after the multi-year slowdown caused by energy shocks and weaker external demand. The Commission notes that investment linked to EU funds and defence will remain a major growth driver through 2027. Key indicators to watch include wage dynamics, the impact of VAT and excise changes, and the rollout of ETS2 on energy prices.

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