Economic Policy Reforms 2023

Lithuania

See more data for Lithuania on the related dashboard.

Product and labour markets functioning

Performance gaps

• Redeployment of resources and reallocation of capital and skills are promoted through lean, business-friendly regulation and new insolvency procedures that promote restructuring over exit. However, overly complex licensing mechanisms remain an issue.

• Twice as high a share of SMEs than the EU average reports difficulties in accessing finance. This problem is particularly acute for young innovative SMEs with high growth potential.

• The flexible labour market has helped productivity-enhancing labour re-allocation. However, many workers are under- or over-qualified for their jobs even as high-skilled job offers remain vacant while low-qualified workers look for jobs.

Recommendations

• Simplify licensing procedures in all sectors to stimulate entry of new firms.

• Engage with privately-owned venture funds rather than participating directly in the provision of venture capital.

• Create a framework for attracting, developing, upgrading and retaining skills and bringing them closer to labour market needs by: strengthening firm-based learning; better balancing the attractiveness of firm- and school-based learning; and benefitting from international firms’ experiences with apprenticeship systems.

Digital transition

Performance gaps

• Digital technologies have advanced, but uptake and use still lag behind, particularly among smaller and younger firms. Investments in digital infrastructure have not sufficed to overcome the urban-rural digital divide. Moreover, the scope for digitalising the public sector remains large.

Recommendations

• Implement the National Broadband Plan to ensure 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.

Inclusiveness, social protection, and ageing

Performance gaps

• Poverty has increased until recently, when the pandemic led the government to raise social spending, notably on pensioners and targeted social benefits, and lift the non-taxable income threshold for low-income earners. Nonetheless, the share of the population at-risk-of poverty remains the second highest in Europe.

Recommendations

• Further link social support to needs, especially for the elderly.

• Address the underlying reasons for persistent poverty, such as high unemployment or low skills, through greater activation and better education.

Climate transition

Performance gaps

• The emissions reduction objectives of 30% by 2030 is ambitious, particularly as per-capita carbon emissions are rising amidst persistent fuel subsidies.

Recommendations

• Extend carbon pricing to all areas, including large emission sectors such as transport and agriculture.

• Increase public investment in targeted research and development and green infrastructure.

• Compensate vulnerable households for potential cost increases.

Overall performance