Paolo Soro

Lithuania: Achieving stronger and more inclusive growth will require new reforms

Lithuania has made remarkable economic and social progress, but further policy reforms will be necessary to ensure a more productive and inclusive economy, according to the first-ever OECD Economic Assessment of Lithuania.

The Assessment, presented in Vilnius today by OECD Secretary-General Angel Gurría and Prime Minister of Lithuania Algirdas Butkevičius, underlines the country’s successful economic development over the past 25 years, as well as its robust resilience to external shocks, which allowed it to bounce back from the global economic crisis quicker and faster than most of its European Union partners. The Assessment also underlines, however, the serious challenges that must still be overcome to boost productivity and bring about further convergence of living standards for all citizens with other advanced economies.

“The Lithuanian economy has bounced back from the crisis and is expected to gain momentum, despite the weak global recovery,” Mr Gurría said. “Deft management of the post-crisis economy has delivered strong growth, declining unemployment and improving public finances. Despite these considerable achievements, further reforms will be needed to bring about a more productive and more inclusive economy for the benefit of all Lithuanians.”

The OECD Economic Assessment of Lithuania feeds into the country’s ongoing OECD accession process, which was launched in April 2015. It aims to contribute to the design and implementation of reforms that will help Lithuania to continue modernising its economy while improving living standards for all.

To ensure continuing advances in income and wellbeing, the Assessment calls for new reforms to boost productivity, which is one-third below the OECD average. The main priorities should be to improve the education system, by increasing the role of workplace training and attracting talented people to the teaching profession, to enhance the governance of state-owned enterprises, to further develop infrastructure and to further promote innovation, notably by ensuring that the overall policy framework supports the growth of young innovative firms. The government can also do more to reduce informality, which would both improve tax collection and level the playing field to support the growth of the most productive firms.

According to the Assessment, reforms for bringing about a stronger economy go hand-in-hand with efforts to reduce poverty, which affects one in five Lithuanians. They would also make Lithuania a more inclusive society, notably for low-skilled workers and the unemployed. A wider access to lifelong learning for the low-skilled and the planned movement toward a “flexicurity” model, with streamlined labour market regulations combined with greater income support in case of job loss, should expand opportunities and share prosperity more widely. Building up the capacity of public employment services, to get people back to work, and strengthening the minimum income support to the poor, are both equally critical. The report welcomes the “New Social Model” reform package and also calls on the government to promote healthy lifestyles and a stronger primary health care system.

The Assessment was presented in Vilnius during an official visit of the OECD Secretary-General, organised to advance Lithuania’s accession process to the Organisation. The visit includes meetings with President Dalia Grybauskaitė, Prime Minister Algirdas Butkevičius, various ministers, parliamentarians, and representatives of the business community and civil society.

An Overview of the Economic Assessment, with the main conclusions, is freely accessible on the OECD’s web site.

News-report by OECD

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