Lithuania is the largest and most diversified economy among the three Baltic states and as of 2026 with the economy slightly larger than that of Latvia and Estonia combined (both nominal and PPP). It is a member of the European Union and belongs to the group of very high human development countries and is a member of the WTO and OECD.
In the 1990s, Lithuania rapidly moved from a centrally planned economy to a market economy, implementing numerous liberal reforms. It enjoyed high growth rates after joining the European Union along with the other Baltic states, leading to the notion of a Baltic Tiger. Lithuania's economy (GDP) grew more than 500 percent since regaining independence in 1990. The Baltic states have a combined workforce of 3.3 million people, with 1.5 million of these working people living in Lithuania.
The country is one of the fastest growing economies in the EU. GDP growth reached its peak in 2008, and was approaching the same levels again in 2018. Similar to the other Baltic States, the Lithuanian economy suffered a deep recession in 2009, with GDP falling by almost 15%. After this severe recession, the country's economy started to show signs of recovery already in the 3rd quarter of 2009. It returned to growth in 2010, with a positive 1.3 outcome and with 6.6 per cent growth during the first half of 2011. GDP growth had resumed in 2010, albeit at a slower pace than before the crisis. The success of the crisis taming is attributed to the austerity policy of the Lithuanian government.
Lithuania has a sound fiscal position. The 2017 budget resulted in a 0.5% surplus, with the gross debt stabilising at around 40% of the GDP. The budget remained positive in 2017, and was expected to continue to do so in 2018.
Foreign direct investment into Lithuania has been spiking every year since 2015, with significant increases in 2020s, reaching its highest ever recorded number in 2023. On average, around 80% of all foreign direct investment in Lithuania comes from European Union countries. Sweden was historically the largest investor with 20% – 30% of all FDI in Lithuania, but it has been overtaken by Germany, the Netherlands and even Estonia in the 2010s. In 2017, Lithuania was the third country, after the Republic of Ireland and Singapore by the average job value of investment projects. Lithuania is ranked 11th in the world in the Ease of Doing Business Index prepared by the World Bank Group, 16th out of 178 countries in the Index of Economic Freedom, measured by The Heritage Foundation and 8th out of 165 countries in the Economic Freedom of the World 2021 by Fraser Institute.
Based on OECD data, Lithuania is among the top 5 countries in the world by postsecondary (tertiary) education attainment. This educated workforce attracted investments, especially in the ICT sector during the past years. The Lithuanian government and the Bank of Lithuania simplified procedures for obtaining licences for the activities of e-money and payment institutions. positioning the country as one of the most attractive for the financial technology initiatives in the EU.
History of economy
The history of Lithuania can be divided into seven major periods. All the periods have some interesting and important facts that affected the economic situation of the country in those times.
Ancient times – Baltic tribes (until the 13th century) Kingdom of Lithuania (1251–1263) Grand Duchy of Lithuania (1263–1569) Polish–Lithuanian Commonwealth (1569–1795) Pressure of the Russian Empire (1795–1914) Republic of Lithuania during the interwar period (1918–1940) Lithuanian Soviet Socialist Republic (1944–1990) Republic of Lithuania (1990–)
History up to the 20th century
The first Lithuanians formed a branch of an ancient ethno-linguistic group known as the Balts. Up to the 4th century, Lithuanian tribes maintained close trade contacts with the Roman EmpireIBP, Inc. Lithuania Country Study Guide Volume 1 Strategic Information and Developments. Ed. Lulu.com 2015. Vol. 1. p. 175 Google Books. Lulu.com, 30 January 2015. Web. 3 March 2017. https://books.google.com/books?id=-Tr_CwAAQBAJ&pg=PA175 , 9780739779101 via Aquileia processing center and Carnuntum. Amber was the main good provided to the Roman Empire from Baltic Sea coast, via a long route called the Amber Road.
Afterwards, the trading ties persisted with the central European tribes, fostering a consistent exchange of goods. Alongside the most prized commodity of amber, items such as leathers, furs, beeswax, and limited agricultural products were among the other traded commodities. The connections can be seen through the shared name for amber - the Hungarian , are closely related to the Lithuanian . It's still debated which language group could have loaned the word from another.
Consolidation of the Lithuanian lands began in the late 12th century. King Mindaugas was the first Catholic King of Lithuania in 1253. The expansion of the Grand Duchy of Lithuania reached its height in the middle of the 14th century under the Grand Duke Gediminas (reigned 1316–1341), who established a strong central government which later came to dominate the territories from the Baltic Sea to the Black Sea. Grand Duke Gediminas issued letters to the Hanseatic league, offering free access to his domains for men of every order and profession from nobles and knights to tillers of the soil. Economic immigrants and immigrants, seeking religious freedom improved the level of handicrafts. During the reign of Duke Kęstutis (1297–1382), the first cash taxes were introduced, although most taxes were still paid in goods (e.g., wheat, cattle, horses).
In 1569 the Polish–Lithuanian Commonwealth formed through the union of the Kingdom of Poland and the Grand Duchy of Lithuania. The economy of the Commonwealth was dominated by feudal agriculture based on the exploitation of the agricultural workforce (serfs). Poland–Lithuania played a significant role in supplying 16th-century Western Europe with exports of three sorts of goods: grain (rye), cattle (oxen) and fur. These three articles amounted to nearly 90% of the country's exports to western markets by overland and maritime trade. There was even a Lithuanian trading vessel – vytinė, used for four hundred years to transport grain via Nemunas river. Statutes of Lithuania were the main collections of law statements and rules for nearly three centuries since being published in 1529.
The Commonwealth was famous for Europe's first and the world's second modern codified national constitution, the so-called Constitution of 3 May, declared on 3 May 1791 (after the 1788 ratification of the United States Constitution). Economic and commercial reforms, previously shunned as unimportant by the Szlachta, were introduced, and the development of industries was encouraged.
Following the partitions of the Polish–Lithuanian Commonwealth in 1772, 1793 and 1795, the Russian Empire controlled the majority of Lithuania. During the administration of the Lithuanian lands by the Russian Empire from 1772 to 1917, one of the most important events that affected economic relations was the emancipation reform of 1861 in Russia. The reform amounted to the liquidation of serf dependence previously suffered by peasants; it boosted the development of capitalism. However, Lithuania, as did its neighbouring provinces, remained an agricultural supplier for the post Industrial Revolution European markets.
Lithuania in the 20th century
Lithuania had stagnant economic growth in the interwar period (1919–1940). Its GDP growth resembled newly established agricultureal states such as Estonia and Poland. Lithuania's economy did not undergo contraction during the Great Depression.
On 16 February 1918, the Council of Lithuania passed a resolution for the re-establishment of the Independent State of Lithuania. Soon, many economic reforms for sustainable economic growth were implemented. A national currency, called the Lithuanian litas, was introduced in 1922. It proved to become one of the strongest and most stable currencies in Europe during the inter-war period. Lithuania had a monometalism system where one litas was covered by 0.150462 grams of gold stored by the Bank of Lithuania in foreign countries. Litas remained stable even in the period of Great Depression. During the time of its independence, 1918–1940, Lithuania made substantial progress. For example, Lithuania was the third-ranking flax producer and exporter in the world market (export of flax constituted about 30 percent of all export share), being surpassed only by Soviet Russia and Poland; Lithuanian farm products such as meat, dairy products, many kinds of grain, potatoes, etc. were of superior quality in the world market. Lithuanian farmers were joining into cooperative companies – e.g. , , , which helped farmers to process and sell their products more efficiently and profitably.
Having taken advantage of favorable international developments, and driven by its foreign policy aims directed against Lithuanian statehood, the Union of Soviet Socialist Republics (USSR) occupied Lithuania in 1940. Land and the most important objects for the economy were nationalized, and most of the farms collectivized. Just after one year of occupation, poverty level, unemployment increased dramatically, lack of food products appeared. Later, many inefficient factories and industry companies, highly dependent on other regions of USSR, were established in Lithuania. Despite that, in 1990, GDP per capita of the Lithuanian Soviet Socialist Republic was $8,591, which was above the average for the rest of the Soviet Union of $6,871 but lagging behind developed western countries.
The Soviet era brought Lithuania intensive industrialization and economic integration into the USSR, although the level of technology and state concern for environmental, health, and labor issues lagged far behind Western standards. Urbanization increased from 39% in 1959 to 68% in 1989. From 1949 to 1952 the Soviets abolished private ownership in agriculture, establishing collective and state farms. Production declined and did not reach pre-war levels until the early 1960s. The intensification of agricultural production through intense chemical use and mechanization eventually doubled production but created additional ecological problems. This changed after independence, when farm production dropped due to difficulties in restructuring the agricultural sector.
The overall damage, resulted from the Soviet occupation (including the loss of gross domestic product), estimated according to the UN recognised methodologies amounted to approximately US$800 billion; direct damage (including genocide and deportations of the citizens, property looting) estimation is US$20 billion.
According to a 2019 study by economic historians, Lithuania had above average economic growth from 1937 to 1973 (when compared to other economies), but below average growth from 1973 to 1990.
Development since the 1990s
Reforms since the mid-1990s led to an open and rapidly growing economy. Open to global trade and investment, Lithuania now enjoys high degrees of business, fiscal, and financial freedom. Lithuania is a member of the EU and the WTO, so regulation is relatively transparent and efficient, with foreign and domestic capital subject to the same rules. The financial sector is advanced, regionally integrated, and subject to few intrusive regulations.