Lithuania Economic Snapshot

2 May 2024

Latest Economic Outlook Note – Lithuania

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September 2023

Economic Policy Reforms: Going for Growth 2023 - Lithuania

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Economic Survey of Lithuania - 20 October 2022

Lithuania’s economy exited the COVID-19-crisis successfully and was growing fast until early 2022, buoyed by rising exports and rapid integration into global value chains. However, with Russia’s aggression of Ukraine continuing and its consequences spreading, the outlook has darkened. Growth has slowed, and inflation has risen to some of the highest levels in the euro area, driven by high energy and food prices. The country cut all energy ties with Russia, relying on imports from other countries instead. The government supports the many Ukrainian refugees and helps households and firms weather the energy crisis. Structural unemployment and skills mismatch remain high, while poverty declines only slowly. Further reform could help maintain economic resilience and cope with rising uncertainty. Reducing the scope of state-owned firms and improving their governance would help raise productivity. Linking education to labour market needs more closely would help improve employment and skills. Greater uptake of digital technologies by firms, along with a modernised public sector and strong skills will also help lift trend growth. Reaching the climate objective of net zero emissions by 2050 will require bold policy action, both on the tax and the spending side.

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Raising Local Public Investment in Lithuania

Lithuania’s government has set up regional development as one of its highest policy priorities. Municipal public investment can attract private domestic and foreign direct investment, foster growth and improve well-being of all residents. Moreover, local public investment could help mitigate the economic impact of the COVID-19 pandemic.
However, municipal governments account for only 33% only of public investment in Lithuania, while on average sub-national governments account for 46% of public investment in the OECD. Indeed, weak own-source revenue and tight fiscal rules constrain municipalities’ willingness and capacity to invest.
This report analyses the Lithuanian framework for municipal public investment funding and financing. It draws on the experience of five countries - Denmark, Finland, Ireland, the Netherlands and New Zealand - to identify policy options to increase the capacity of local governments to carry out public investment, while ensuring the quality of investment projects and financial sustainability of municipalities.