OECD ECONOMIC SURVEY OF

LITHUANIA 2018

Promoting inclusive growth Vilnius, 5 July 2018

@OECD

@OECDeconomy

http://www.oecd.org/eco/surveys/economic-survey-lithuania.htm

Incomes are converging

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

GDP per capita, 2010 USD PPP

Lithuania OECD

Source: OECD Economic Outlook database. 2

Unemployment is declining

0

2

4

6

8

10

12

14

16

18

20

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

% labour force 15-74 Unemployment rate

Source: OECD Labour force statistics database. 3

Export performance is robust

80

90

100

110

120

130

140

150

160

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Index 2005=100 Export performance¹

Lithuania

Latvia

Estonia

Poland

1. Export performance is measured as actual growth in exports relative to the growth of the country’s export market,

which represents the potential export growth for a country assuming that its market shares remain unchanged.

Source: OECD Economic Outlook database. 4

The budget is now in surplus

-10

-8

-6

-4

-2

0

2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Government net lending, in % of GDP

Source: OECD Economic Outlook database. 5

Poverty remains high

0

2

4

6

8

10

12

14

16

18

20

Den

mar

kF

inla

ndC

zech

Rep

.Ic

elan

dN

ethe

rland

sF

ranc

eLu

xem

bour

gN

orw

ayS

lova

k R

ep.

Aus

tria

Irel

and

Slo

veni

aS

wed

enG

erm

any

Bel

gium

Sw

itzer

land

Hun

gary

New

Zea

land

Uni

ted

Kin

gdom

Pol

and

OE

CD

Por

tuga

lA

ustr

alia

Italy

Kor

eaC

anad

aG

reec

eS

pain

Chi

leE

ston

iaJa

pan

Latv

iaLi

thua

nia

Mex

ico

Uni

ted

Sta

tes

Tur

key

Isra

el

%

Relative poverty rate 2015 or latest year available

Note: The relative poverty rate is the ratio of the number of people whose income falls below the poverty line; taken as

half the median household income of the total population. The indicator is calculated in disposable income after taxes

and transfers.

Source: OECD Income Distribution and Poverty database. 6

Well-being could be improved

0

2

4

6

8Housing

Income and jobs

Community

Education

Environment

Health

Life Satisfaction

Safety

OECD Lithuania Lowest OECD¹

1. Lowest OECD refer to the 17 countries with the lowest score among the OECD countries. Data are for 2016 or latest

available year.

Source : OECD Better life index indicators database; Eurostat; Gallup database; and World Bank World Development

Indicators. 7

The New Social Model improved labour

market flexibility…

0

0.5

1

1.5

2

2.5

3

3.5

New

Zea

land

Uni

ted

Sta

tes

Can

ada

Uni

ted

Kin

gdom

Chi

leA

ustr

alia

Est

onia

Irel

and

Hun

gary

Japa

nS

witz

erla

ndLi

thua

nia

(pos

t-re

form

)Ic

elan

dF

inla

ndK

orea

Isra

elS

lova

k R

ep.

OE

CD

Gre

ece

Nor

way

Den

mar

kT

urke

yS

pain

Slo

veni

aP

olan

dLi

thua

nia

(pre

-ref

orm

)A

ustr

iaS

wed

enM

exic

oC

zech

Rep

.P

ortu

gal

Luxe

mbo

urg

Fra

nce

Ger

man

yIta

lyLa

tvia

Net

herla

nds

Bel

gium

Strictness of employment protection legislation: Regular workers Scale from 0 (least restrictions) to 6 (most restrictions), latest year

Note: The indicator is calculated in disposable income after taxes and transfers.

Source: OECD Income Distribution and Poverty database. 8

… and unemployment benefits are

now more generous

Note: For Lithuania, the results for January and July 2017 represent the situation before and after introduction of the New

Social Model reform, respectively; 2015 for the remaining countries.

Source: OECD (2018), OECD Reviews of Labour Market and Social Policies: Lithuania, OECD Publishing, Paris.

0

10

20

30

40

50

60

70

80

90

100

Gre

ece

Aus

tral

iaN

ew Z

eala

ndU

nite

d K

ingd

omS

wed

enC

hile

Kor

eaT

urke

yE

ston

iaA

ustr

iaIr

elan

dG

erm

any

Hun

gary

Japa

nU

nite

d S

tate

sO

EC

DLi

thua

nia

(pre

)S

pain

Slo

vak

Rep

.P

olan

dIc

elan

dC

anad

aC

zech

Rep

.N

orw

ayF

inla

ndS

love

nia

Italy

Fra

nce

Net

herla

nds

Den

mar

kB

elgi

umS

witz

erla

ndP

ortu

gal

Latv

iaLi

thua

nia

(pos

t)Lu

xem

bour

gIs

rael

% Net Replacement Rates for a single person in unemployment, 2015

Top-ups (in the 3d month)

Unemployment benefits (in the 3rd month)

Unemploymnet benefits and top-ups (in the 9th month)

9

Private sector debt and house prices

remain below historical peaks

Source: European Central Bank; OECD Economic Outlook database; and OECD House price index database.

30

40

50

60

70

80

80

120

160

200

240

280

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% of GDP Index, 2007=100 Credit growth and housing prices

Nominal house prices Credit to private non-financial sector² (RHS)

10

Debt is falling but could decline

further

Note: Projected debt reduction paths under different deficit scenarios.

Source: OECD calculation.

10

15

20

25

30

35

40

45

50

55

60

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

% of GDP

No deficit Deficit 1% of GDP Deficit 0.5% of GDP

11

High social security contributions

reduce employability of the low-skilled

Source: OECD taxing wages database.

-10

0

10

20

30

40

50

60

Chi

leIs

rael

Irel

and

New

Zea

land

Mex

ico

Sw

itzer

land

Kor

eaA

ustr

alia

Uni

ted

Kin

gdom

Net

herla

nds

Can

ada

Icel

and

Luxe

mbo

urg

Uni

ted

Sta

tes

Por

tuga

lO

EC

DN

orw

ayJa

pan

Spa

inF

ranc

eG

reec

eS

lova

k R

ep.

Est

onia

Den

mar

kT

urke

yS

love

nia

Fin

land

Pol

and

Bel

gium Ita

lyLi

thua

nia

Cze

ch R

ep.

Aus

tria

Sw

eden

Latv

iaG

erm

any

Hun

gary

% of total labour cost Decomposition of the tax wedge, 2016

Single without children 50% of the average wage

Income tax Social security contribution

12

Property taxes are low

Source: OECD Revenue statistics database; and Ministry of Finance of Lithuania.

0

0.5

1

1.5

2

2.5

3

3.5

Luxe

mbo

urg

Sw

itzer

land

Mex

ico

Aus

tria

Cze

ch R

ep.

Tur

key

Est

onia

Slo

vak

Rep

.G

erm

any

Nor

way

Lith

uani

aS

love

nia

Irel

and

Hun

gary

Chi

leS

wed

enF

inla

ndK

orea

Por

tuga

lLa

tvia

Net

herla

nds

OE

CD

Spa

inP

olan

dIta

lyB

elgi

umD

enm

ark

Icel

and

Aus

tral

iaJa

pan

New

Zea

land

Isra

elG

reec

eU

nite

d S

tate

sF

ranc

eC

anad

aU

nite

d K

ingd

om

% of GDP

Property tax revenues 2016 or latest year available

13

Key recommendations for more

inclusive growth

• Set a debt target and establish a credible path to reach it

• Reduce social security contributions, especially for low-income workers

• Increase property taxation, while exempting low-income households

• Assess spending efficiency by carrying out spending reviews

• Actively use macro-prudential measures once financial imbalances emerge

14

Productivity and inclusiveness: a twin

challenge

15

Labour productivity is low

Source: OECD Economic Outlook database.

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

Mex

ico

Chi

leLa

tvia

Hun

gary

Est

onia

Lith

uani

aP

ortu

gal

Pol

and

Gre

ece

Cza

ch R

ep.

Slo

veni

aN

ew Z

eala

ndIs

rael

Slo

vak

Rep

.T

urke

yK

orea

Japa

nO

EC

DS

pain

Uni

ted

Kin

gdom

Icel

and

Ger

man

yIta

lyF

inal

ndC

anad

aA

ustr

iaA

ustr

alia

Net

herla

ndD

enm

ark

Fra

nce

Sw

eden

Sw

itzer

land

Bel

gium

Uni

ted

Sta

tes

Nor

way

Luxe

mbo

urg

Irel

and

Labour productivity, USD PPP per worker, 2017

16

The labour market is not very

inclusive

1. Calculated on the labour force aged 25-64.

2. Data refer to 2016.

Source: OECD Gender employment database

0

5

10

15

20

25

30

Men

Wom

en

15-2

4

25-5

4

55-6

4

Low

-ski

lled¹

Med

ium

-ski

lled¹

Hig

h-sk

illed

¹

Gender Age Educational attainment² Long-termUNR²

% Group-specific unemployment rates (UNR), 2017

Lithuania OECD

17

Informality is high

Source: Eurobarometer.

0

2

4

6

8

10

12

Poland European Union Lithuania Estonia Latvia

% of population aged 15+

People carrying out undeclared paid activities

18

Insolvency procedures are

cumbersome

1. The strength of insolvency framework index is a composite indicator of the quality of the insolvency framework

based on the time, cost and outcome of insolvency proceedings involving domestic legal entities.

Source: World Bank Doing business 2018 database.

0

2

4

6

8

10

12

14

16

Luxe

mbo

urg

Lith

uani

aT

urke

yN

ew Z

eala

ndH

unga

ryIr

elan

dA

ustr

alia

Aus

tria

Can

ada

Fra

nce

Uni

ted

Kin

gdom

Bel

gium

Icel

and

Mex

ico

Net

herla

nds

Nor

way

Slo

veni

aO

EC

DC

hile

Den

mar

kG

reec

eLa

tvia

Spa

inS

wed

enS

witz

erla

ndIs

rael

Cze

ch R

ep.

Slo

vak

Rep

.Ita

lyE

ston

iaJa

pan

Kor

eaP

olan

dF

inla

ndP

ortu

gal

Ger

man

yU

nite

d S

tate

s

Scale from 0 (worst) to 16 (best)

Strength of insolvency framework index (0-16), 2017

19

Firms and research institutions

could collaborate more

Source: Eurostat.

0

5

10

15

20

25

Italy

Latv

ia

Lith

uani

a

Por

tuga

l

Gre

ece

Pol

and

Spa

in

Irel

and

Luxe

mbo

urg

Cze

ch R

ep.

Fra

nce

Hun

gary

Slo

vaki

a

EU

28

Ger

man

y

Net

herla

nds

Est

onia

Sw

eden

Den

mar

k

Uni

ted…

Slo

veni

a

Bel

gium

Aus

tria

Fin

land

% of innovating firms

Firms collaborating on innovation with higher education or research institutions

20

Vocational education and training

should be strengthened

Source: OECD education at a Glance 2017.

0

10

20

30

40

50

60

70

80

Kor

ea

Japa

n

Hun

gary

Lith

uani

a

Chi

le

Gre

ece

New

…

Icel

and

Spa

in

Est

onia

Mex

ico

Sw

eden

Latv

ia

Uni

ted…

Isra

el

Fra

nce

Den

mar

k

Por

tuga

l

Ger

man

y

OE

CD

Tur

key

Nor

way

Pol

and

Italy

Aus

tral

ia

Bel

gium

Luxe

mbo

urg

Sw

itzer

land

Slo

veni

a

Net

herla

nds

Slo

vak

Rep

.

Aus

tria

Fin

land

Cze

ch R

ep.

%

Share of vocational students on upper secondary students, 2015

21

Social support is relatively weak

1. 2017 for Lithuania, with Heating Compensation ("Lithuania (HC)") and without ("Lithuania (no HC)").

Source: OECD (2018), OECD Reviews of Labour Market and Social Policies: Lithuania, OECD Publishing, Paris.

0

10

20

30

40

50

60

70

Italy

Tur

key

Gre

ece

Chi

leH

unga

ryU

nite

d S

tate

sS

pain

Por

tuga

lS

lova

k R

ep.

Isra

elLa

tvia

Lith

uani

a (n

o H

C)

Can

ada

Kor

eaE

ston

iaO

EC

DN

ew Z

eala

ndB

elgi

umS

wed

enF

ranc

eN

orw

ayC

zech

Rep

ublic

Pol

and

Sw

itzer

land

Aus

tral

iaLi

thua

nia

(HC

)S

love

nia

Net

herla

nds

Luxe

mbo

urg

Aus

tria

Fin

land

Ger

man

yIc

elan

dIr

elan

dU

nite

d K

ingd

omD

enm

ark

Japa

n

%

Net income from minimum-income benefits as a % of the median equivalised household income, couple with two children, 2015¹

Net income from minimum-income benefits Poverty line

22

More should be done to get people

back to work

1. Active labour market programmes (categories 2-7) include: cover training, employment incentives, supported

employment and rehabilitation, direct job creation and start-up incentives.

Source: OECD Labour database.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Aus

tral

ia

Est

onia

Latv

ia

Can

ada

Isra

el

New

…

Slo

vak…

Slo

veni

a

Gre

ece

Lith

uani

a

Ger

man

y

Cze

ch R

ep.

Pol

and

Nor

way

OE

CD

Italy

Spa

in

Por

tuga

l

Sw

itzer

land

Irel

and

Bel

gium

Net

herla

n…

Aus

tria

Luxe

mbo

…

Fra

nce

Hun

gary

Fin

land

Sw

eden

Den

mar

k

% of GDP

Public expenditure in activation programmes¹ 2015 or latest year available

23

Key recommendations for raising

productivity and inclusiveness

• Address skills mismatch by continuing the reform of the education system at all levels

• Strengthen work-based learning, including apprenticeships

• Continue the reform of innovation policy and strengthen collaboration between firms and research institutions

• Simplify bankruptcy procedures and facilitate restructuring

• Increase investment in active labour market programmes upon close monitoring of results

• Further increase the level of social assistance while maintaining strong work incentives

24

Ageing together

25

The population is ageing

Source: United Nations, Department of Economic and Social Affairs, Population Division (2015). World Population

Prospects.

0

10

20

30

40

50

60

2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

% population 65+ on population 15-64

Old age dependency ratio, projections, 2010 - 2060

Lithuania EU OECD

26

The pension system is not targeted

at the poor

Source: Eurostat.

0

5

10

15

20

25

30

35

40

45

Slo

vak

Rep

.

Hun

gary

Cze

ch R

ep.

Fra

nce

Den

mar

k

Luxe

mbo

urg

Net

herla

nds

Fin

land

Gre

ece

Pol

and

Spa

in

Aus

tria

EU

Italy

Bel

gium

Irel

and

Sw

eden

Uni

ted

Kin

gdom

Ger

man

y

Slo

veni

a

Por

tuga

l

Rom

ania

Bul

garia

Cro

atia

Lith

uani

a

Latv

ia

Est

onia

% of population 65+

Old age population at risk of poverty, 2016

27

Life expectancy of men is low

Source: Eurostat Health statistics database.

0

10

20

30

40

50

60

70

80

Latv

ia

Est

onia

Lith

uani

a

Slo

vak

Rep

.

Aus

tria

Slo

veni

a

Fin

land

Hun

gary

Por

tuga

l

Den

mar

k

Sw

itzer

land

Pol

and

Luxe

mbo

urg

Fra

nce

Cze

ch R

ep.

Net

herla

nds

Uni

ted

Kin

gdom

EU

28

Bel

gium

Gre

ece

Ger

man

y

Spa

in

Irel

and

Italy

Icel

and

Nor

way

Sw

eden

Healthy life years at birth for men, 2016

28

Health care is too hospital-centric

Source: OECD Health Statistics database. 29

3.6

-10

-6.5

15.2

-2.1

2.2

-4.5 -4.4

12.3

-1.9

-15

-10

-5

0

5

10

15

20

Hospital care Outpatient care Long term care Medical goods Collective services

Percentage points

Health expenditure by function, difference to OECD average

2004 2015

Participation in life-long learning is

low

Note: Data refer to the share of 25 to 64 year-olds who participated in education or training in the 4 weeks prior to

the survey.

Source: Eurostat (2017), Education and training statistics database.

0

5

10

15

20

25

30

35

SV

K

PO

L

GR

C

TU

R

LTU

HU

N

IRL

BE

L

LVA

ITA

DE

U

CZ

E

ES

P

PR

T

EU

28

SV

N

GB

R

AU

T

ES

T

LUX

FR

A

NLD

NO

R

ISL

FIN

DN

K

SW

E

CH

E

%

Participation rate in lifelong education or training, 25-64 year-olds, 2016

30

Net migration contributes to

skill shortages

Source: Statistics Lithuania.

0

10

20

30

40

50

60

70

80

90

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Thousands of persons

Emigration and immigration, absolute numbers

Emigration

Immigration including return migrants

31

Key recommendations for an

ageing society

• Continue moving pensions from the pay-as-you go (first) pillar to the funded (second) pillar

• Fund the wage-independent basic pension through the general budget rather than social contributions

• Continue reorganising the hospital sector and improve outpatient and long-term care

• Provide financial incentives for life-long learning to firms and employees, especially older

• Reach out better to emigrants and ease restrictions for high-skilled immigrants

• Extend and improve support for childcare, to help parents reconcile work and family

32

For more information

33

• Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

• This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

http://www.oecd.org/eco/surveys/economic-survey-lithuania.htm

@OECD

@OECDeconomy