Riga — June 3, 2026 — The European Bank for Reconstruction and Development (EBRD) has forecast that economic growth in the Baltic states will moderate in 2026 as the impact of the Middle East-related energy shock weighs on output. According to the Bank’s latest Regional Economic Prospects report, GDP is expected to grow by 2.1% in Estonia, 2.0% in Latvia, and 3.0% in Lithuania.
Compared with the February 2026 outlook, forecasts have been revised down slightly for all three countries, reflecting higher inflationary pressures and weaker external demand. Despite these challenges, growth remains supported by resilient private consumption, rising defence expenditure, and EU-backed investment projects, including the major Rail Baltica infrastructure scheme.
In Estonia, participation in the Nordic-Baltic electricity market has muted the energy shock, with hydro, nuclear, and wind generation providing protection from higher gas prices. Growth is expected to reach 2.1% in 2026 and 2.3% in 2027, supported by public investment and real wage growth.
Latvia’s economy is forecast to expand by 2.0% in 2026, driven by investment, recovering consumption, and stronger service exports. EU fund absorption and Rail Baltica construction are expected to sustain growth into 2027, though risks remain from potential delays to infrastructure projects and renewed energy price pressures.
Lithuania is projected to outperform its Baltic peers with 3.0% growth in 2026, despite being more exposed to the energy shock due to reliance on gas-fired electricity generation. Strong domestic demand, investment, and a one-off boost to household spending linked to pension-system changes will support activity, before moderating to 2.2% in 2027.
The EBRD noted that growth across its regions will average 3.1% in 2026, before picking up to 3.6% in 2027, reflecting the broader impact of the energy shock. To date, the Bank has invested more than €2.1 billion in Lithuania and over €1.3 billion in both Estonia and Latvia, focusing on renewable energy, capital market development, and innovation-driven sectors to strengthen resilience.
