Lithuania OECD Economic Survey Presentation

Sailing through rough waters

MACROECONOMIC AND STRUCTURAL DEVELOPMENTS AND POLICIES

The Lithuanian economy has been growing fast

Note: In Panel B, growth rates are based on real GDP per capita.

The war in Ukraine undermined the strong recovery from the pandemic

% changes

Y-o-y % changes

Inflation has soared

% changes

Inflation

Consumer Price Indices

Consumer price index

% changes

Real wages face pressures

Real wages Index, 2005Q1 = 100

Real wages correspond to nominal wage rate deflated by consumer price index (CPI).

OECD Economic Outlook No. 111 database (updated).

Productivity accelerated significantly

Productivity growth

Unemployment is falling and labour force participation is rising

market

More people are immigrating than emigrating

Emigrants

International migration

international migration

Growth will slow

Export performance has been solid

Export performance Index, 2005Q1

100

Note: Export performance reflects the growth of a country’s export markets compared to that of all other countries.

Source: OECD, National Accounts database.

High-value exports are rising but remain below the OECD average

The financial system looks resilient

Non-performing loans by loan segment

Loans to non-financial corporations Loans for house purchase

Consumer loans

The fintech hub is vibrant

Fintech

Number of companies and employees

of fintech companies

Number of persons employed by fintech companies→

Lithuania’s population will age rapidly

Note: The old age dependency ratio is the number of individuals aged 65 and more to the population aged between 15 and 64.

Source: United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019, Online Edition. Rev. 1.

Debt could rise significantly with population ageing

Gross government debt

% of GDP% of GDP

Historic Ageing cost scenario Ageing cost plus policy reform scenario

Primary balance at -0.5% of GDP scenario

Note: Debt projections until 2026 follow the fiscal plan as published in October 2021. The baseline scenario assumes a primary balance of minus 0.5% of GDP and the age structure of the population remaining the same. The “ageing cost scenario” adds public health, long-term care and pension spending obligations on top of the baseline scenario. The “ageing cost plus policy reform scenario” reflects the positive growth effects of reforms shown in Box 1.5, subtracted from the ageing cost scenario. Based on Guillemette et al. (2017).

OECD Economic Outlook No. 111 database; and OECD calculations.

Raising the retirement age would help reduce spending pressures

Government spending on ageing

Health and long-term care

Public pensions

With reform of retirement age

Local tax revenues are low

Recommendations to improve financial and fiscal policies

• Tighten fiscal policy at an appropriate pace to help mitigate inflationary pressures.

• Ensure that support is targeted at vulnerable households and firms affected by high energy prices.

• Ensure that the budget deficit returns to a sustainable level over the medium term.

• Consider establishing an automatic link between the retirement age and life expectancy beyond the year 2026.

• Assign more own-source revenues to local government.

STRUCTURAL POLICIES

The state is active in many sectors

Involv. in network sectors

of SOEs

SOEs

control

controls

More stringent regulation

Note: Negative values reflect less stringent and positive values more stringent regulation. Green bars belong to the high-level indicator “Barriers to domestic and foreign entry”, while blue bars belong to the high-level indicator “Distortions induced by state involvement”.

OECD, Product Market Regulation database.

Trust in government is relatively low

Quality of institutions is below the OECD average

rights Security

governance

government

The fight against corruption is being strengthened

PISA outcomes have recently improved but remain below average

PISA scores by domain,

OECD average

Reading Science Mathematics

Small schools have weaker test scores

school test score

Note: Panel B: test scores are taken from standardised exams circulated to Grade 10 students and are scaled from one to 10.

Source: Ministry of Education, Science and Innovation; OECD Economic Survey of Lithuania, 2020.

Vocational education and training has little significance

Students in work- and school-based learning, share in upper-secondary education, 2018

School-based VET Firm-based VET Overall VET

Canada Chile Korea Japan Iceland (20-50%) Australia Lithuania Greece Spain (At least 35%) Ireland Mexico Sweden (60%) Hungary Denmark France (62-75%) Latvia (50%) Portugal (41-47%) Israel (25%) Estonia (18-25%) OECD average United Kingdom… Türkiye (50%) Germany (60%) Norway (50%) Italy Belgium Poland (46%) Luxembourg Switzerland (80%) Netherlands (70%) Slovak Republic Slovenia (22-50%) Austria (80%) Finland (8090%) Czech Republic

Note: Figures in parentheses refer to the most typical duration of the actual work-based component as a percentage of total programme duration. For example, in Germany, time spent at work accounts for about 60% of total programme duration, while the remainder is spent at school.

Source: OECD, Education at a Glance database. For the Czech Republic and Lithuania, data rely on European Centre for the Development of Vocational Training (CEDEFOP).

The share of international students is

International students are those students who moved from their country of origin (defined as the country of prior

or of usual residence) for the purpose of study.

Education at a Glance database

Poverty is declining but remains high

Poverty rate after taxes and transfers

of population

of population

Transport is the largest source of greenhouse gas emissions

Greenhouse gas emissions by source

Transport Energy Industrial processes and product use

Waste

Note: Transport here corresponds to IPCC 1A3 sector, and includes domestic aviation (1A3a), road (1A3b ), rail (1A3c), domestic navigation (1A3d), pipeline transport, and non specified or non energy use transport (1A3e ).

Source: OECD, Environment Statistics database.

Recommendations to make growth stronger and more sustainable

• Subject all public enterprises, whether state- or municipally-owned, to the same legal, financial and regulatory framework as private firms.

• Get vocational education and training closer to the labour market, by strengthening the apprenticeship system.

• Consolidate the school network further, and timely implement the new school curriculum.

• Continue to improve the quality and transparency of the policymaking process.

• Extend carbon pricing to all areas where it is not yet implemented, especially transport and agriculture, while compensating vulnerable households for potential cost increases.

UNLEASHING THE POTENTIAL OF DIGITALISATION

Lithuania has scope for further digitalisation

Government funding for R&D is low and tilted towards tax incentives

Smaller firms lag behind in terms of digital uptake

Note: Digital technologies include Website, E purchases, E sales, Customer Relationship Management (CRM), Enterprise

Resource Planning (ERP), Social media, Cloud computing, Big data, and High-speed broadband. “Small" stands for enterprises with 10-49 employees, "Medium" for enterprises with 50-249 employees and “Large” for enterprises with 250 employees and over.

Source: OECD, ICT Access and Usage by Businesses database.

Broadband coverage is relatively low in rural areas

Following the

of

There is scope to raise venture capital

capital

or latest year

+ start-up

stage

Venture capital (VC) is private equity capital provided to young enterprises not quoted on a stock market. VC stages are defined according to the OECD VC Harmonised Stages definition and include support for pre-launch, launch and early stages under “Seed/start-up/early stage”, which also includes support provided by angel investors, and support for expansion and growth stages under “Later stage”. Data refer to 2021, except for Australia (2019) and the United States (2019).

Digital government could be developed further

Few firms only are evaluating cybersecurity risks

Lithuanian schools can increase ICT capacity

Percentage of students in schools whose principal agreed or strongly agreed with statements about the school’s capacity to enhance learning and teaching using digital devices, 2018

OECD average OECD minimum OECD maximum Lithuania

80

60

40

20

Slovenia Lithuania Slovenia New Zealand New Zealand Denmark Austria Lithuania Lithuania Lithuania Lithuania Lithuania Lithuania

0

100 Number of digital devices connected to the Internet is sufficient

Colombia Colombia Japan Colombia Colombia Luxembourg Japan

School’s Internet bandwidth or speed is sufficient

Number of digital devices for instruction is sufficient

Digital devices at the school are sufficiently powerful in terms of computing capacity

The availability of adequate software is sufficient

An effective online learning support platform is available

Teachers have the necessary technical and pedagogical skills to integrate digital devices in instruction

Source: Minea-Pic, A. (2020), ICT resources in school education: What do we know from OECD work?

Higher education provides many STEM graduates but few ICT skills

STEM graduates by field of study

a share of all tertiary graduates, 2019

Information and Communication Technologies (ICTs)

Other STEM staduates

Tertiary graduates refer to the

for

Engineering

graduating from

OECD, Education at a Glance database.

enrolled at

Participation in adult learning remains low

•

Recommendations for unleashing the productive potential of digitalisation

Subject Provide R&D support through a more balanced combination of taxincentives and direct support to smaller innovative firms.

• Proceed with the implementation of the National Broadband Plan, ensuring universal access to high-speed broadband by 2027.

• Support the development of venture capital by prioritizing public support through privately-owned funds rather than direct engagement.

• Proceed with the digitalisation of public sector, implementing the planned reforms within the envisaged timeframe.

• Enhance awareness of good practices in digital risk management, especially in the case of SMEs.

• Strengthen the digital competencies of teachers by expanding, as envisaged, training opportunities in ICT areas.

• Provide additional funding to tertiary institutions for degree completions in disciplines that are important for the labour market, including digital transformation.

• Proceed with the development of national lifelong learning platform that will serve as a “one-stop shop” for adult education, complementing it with intensified information campaigns and provision of career counselling.

For more information

OECD Economics

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