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http://www.oecd.org/eco/surveys/economic-survey-lithuania.htm
OECD
OECD Economics
2016 OECD ECONOMIC ASSESSMENT OF LITHUANIA
More Productive and Inclusive
Vilnius, 15 March 2016
2
The fiscal position is robust
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014- 12
- 10
- 8
- 6
- 4
- 2
0
2
4
Government deficit, % of GDP
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0
5
10
15
20
25
30
35
40
45
Government debt, % of GDP
3
Tax revenue potential is not fully exploited
Gap between VAT collection and potential VAT revenue,% GDP, 2013
FIN NLD SWE LUX SVN FRA PRT DNK GBR BEL IRL DEU AUT ESP EST CZE HUN POL LVA ITA GRC SVK LTU 0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
Further improve tax collection and continue fighting tax evasion
4
The workforce is set to fall
LTU
LVA
GRCPRT
SVKEST
POLDEU
ESPHUN
SVNCZE
EU28 NLD IRLITA
AUTFRA FIN
DNKGBR ISL
CHEBEL
SWENOR
- 60
- 40
- 20
0
20
40
60
Projections for population aged 15-64 years, % change, 2014-2050
5
The financial sector is recovering
Q4 08
Q109
Q2 09
Q3 Q4 09
Q110
Q2 10
Q3 Q4 10
Q111
Q2 11
Q3 Q4 11
Q112
Q2 12
Q3 Q4 12
Q113
Q2 13
Q3 Q4 13
Q114
Q2 14
Q3 Q4 14
Q115
Q2 15
Q3 15
0
5
10
15
20
25
30
Non-performing loans% of total gross loans
6
Productivity growth has resumed but has slowed
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-70
-60
-50
-40
-30
-20
-10
0
-70
-60
-50
-40
-30
-20
-10
0
Russian financial crisis
Global financial crisis
Labour productivity gap (%) to OECD
7
Well-being is low and income inequality is high
Well being indicators
0
2
4
6
8
10
Incomeand wealth
Jobs andearnings
Housing
Health status
Educat ionand skills
Socialconnect ions
Environmentalquality
Personalsecurity
Subjectivewell-being
Lithuania OECD
ISL
NOR
SVN
CZE
SWE
FIN
BEL
SVK
NLD
AUT
DNK
HUN
CHE
LUX
FRA
DEU
IRL
POL
EU28
GBR
ITA
GRC
PRT
ESP
LTU
LVA
EST
0
10
20
30
40
Income inequalityGini coefficient
8
First challenge: boosting productivity
9
Some regulations need to be more market friendly
PMR Indicator of public ownership, Scale 0 (least) to 6 (most public ownership), 2013
Improve the governance of state-owned enterprises
NLD ESTGBR
CAN
AUTHUN ITA
MEXKOR
OECD
LUX
GRC
CZE
ISR
AUS
FRANORSW
E
CHECHN
IND
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
10
Lithuanian skills are inadequate
EST HUN SVN POL SVK CZE LVA LTU0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40% of firms citing an inadequately educated workforce as a major or very severe obstacle to operations, 2013
Further increase the role of workplace training and cooperation with employers in the education system
Further reduce regulatory barriers to the employment of non-EU workers
11
Participation in lifelong learning is insufficient
Increase access to lifelong learning, especially for low-skilled
GRC SVK HUN POL LTU TUR LVA IRL BEL DEU ITA CZE PRT ESP EST SVN LUX AUT GBR NLD FRA NOR FIN ISL SWE DNK CHE0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
Participation rate in education and training, (last 4 weeks), 25-64 years old, %, 2014
12
Participation in early childhood education is low
TUR
CHEPOLUSASVK FIN LT
UAUSCZE CHL
OECDMEXSVNLV
APRTAUTESTHUNSWE IRLJP
NGBRDEUESP ISLNORDNKBEL ITA LU
XNLD FR
A ISRNZL
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
Participation rate of 4-years old in education, %, 2013
Attract strong talent to the teaching profession by raising pay and investing in teacher development
13
Business sector innovation is low
EU Summary Innovation Index
2007 2008 2009 2010 2011 2012 2013 201430
40
50
60
70
80
90
100
30
40
50
60
70
80
90
100
Lithuania Czech Republic Estonia Latvia Slovak Republic
Improve firm’s awareness of the existence of R&D tax incentives
14
Second challenge: making growth more inclusive
15
Unemployment is still high, especially for low skilled
16
Labour taxes are high
Reduce employer social security contribution on low-skilled workers
CHLNZLIS
RMEXKORCHEIR
LAUSGBRCAN IS
LUSALU
XJP
NNLD
OECDNORPOLPRTGRCTURDNKESPFINSVNSVKESTLT
UCZESW
EIT
ALV
AAUTDEUFRAHUNBEL
0
5
10
15
20
25
30
35
40
45
50
55
0
5
10
15
20
25
30
35
40
45
50
55
Taxes as % of labour cost, 2014single person at 67% of average earnings, no child
17
Strengthen active labour market policies, in particular training,
and the capacities of public employment services to get people back to work
Labour market programmes are small
GBR SVK EST LTU LVA GRC ESP CZE PRT SVN ITA POL IRL DEU BEL NLD FRA HUN LUX NOR AUT FIN SWE DNK0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
Public expenditure on active labour market policy measures per unemployedPercentage of GDP per capita, 2013 or last available year
18
Temporary income support to the unemployed is too low
Increase the coverage and generosity of the unemployment insurance benefit system
Net income replacement rate for unemployment insurance, (first year of unemployment), 2013, % of previous income
GRCKORTURAUSUSANZLESTCHLLT
UGBRHUNSVKSW
EPOLFRA
OECDESPAUTIT
ADEUCZECANNOR IR
LIS
LFINPRTBELJP
NNLD CHESVNLV
ADNKIS
RLU
X
0
20
40
60
80
100
0
20
40
60
80
100
19
Minimum income benefits are low
Increase the level of minimum income for social assistance recipients
Net minimum income value in % of median household income, 2013
CHLUSASVKHUNCANPRTLT
UPOLKORIS
RSVNLV
AESTESPAUSNZL
OECD¹FRANORBELAUTLU
XDEUCZESW
EFIN IS
LCHEGBRDNKIR
LNLD JP
N
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
20
Financial incentives to take a job fall the larger the family
Strengthen the in-work benefits scheme to make work pay, in particular for second earners of families
GR
CTU
RU
SAH
UN
CH
LSV
KIS
RES
PPR
TFR
AC
AN AUS
GB
RN
ZLD
EU EST
BEL
SVN
LUX
LTU
JPN
KO
RN
LD FIN
IRL
ISL
DN
KC
ZEPO
LSW
EAU
TN
OR
LVA
CH
E
0
10
20
30
40
50
60
70
80
90
100
110
120
Effective tax rate on additional earnings when taking a job for social assistance recip-ients
Two children, one-earner at 50% of average earnings
21
Life expectancy is low for men
Further promote healthy lifestyles and primary care services, especially in rural areas
LTU
LVA
MEXEST
HUNTUR
SVKPOL
CZEUSA
CHLSVN
PRTOECD FIN BEL
KORGRC
DNKAUT
DEU IRL
FRAGBR
LUX
NLD CANNOR
ESPNZL
ITAISR
SWEAUS
JPN
CHE ISL40
45
50
55
60
65
70
75
80
85
Life expectancy at birth for males
22
Summary
23
Main messages
• Lithuania has made remarkable progress in the last decades:
o Fostering productivity convergence
o Weathering the Great Recession
• Current challenges:
o Further boosting productivity
o Making growth more inclusive
24
Main Findingso Fiscal policy needs to be adjusted to meet medium to long term fiscal challenges
related to population ageing and future potential macroeconomic shocks.o The tax mix does not facilitate enough inclusive growth.o Low energy efficiency increases vulnerability to world energy price shocks and
jeopardises climate change objectives.
o Businesses have difficulty finding suitably skilled labour.o Test scores for secondary school students are low.o Regulations are generally business friendly, but innovation intensity
of Lithuanian firms is low and access to finance is a constraint for some high productivity firms.
o High wage inequality, low employability for the low skilled and low job satisfaction reduces the well-being of workers and contributes to high emigration.
o Weak support to the unemployed increases vulnerability to poverty and contributes to skill mismatch.
o The social assistance benefits programme is not effective enough at reducing poverty.
o Life expectancy is relatively low and the health care system could make a better contribution to health status.
Prod
uctiv
ity
Incl
usio
nM
acro
25
Recommendations for fiscal and financial policies to support the economy
Continue fighting tax evasion also beyond the VAT gap and improve spending efficiencies (especially in education and health care areas), to allow medium term fiscal consolidation and finance public spending needs.
Further shift the tax burden away from labour, especially from employer social security contributions, and raise recurrent taxes on personal immovable property.
Increase taxes on activities that damage the environment.
26
Recommendations to boost productivity
Further increase the role of workplace training and cooperation with employers in the education system, especially in the context of vocational education and training programmes.
Attract higher performing graduates to the teaching profession by paying higher wages and investing in teacher development.
Promote participation in pre-primary education.
Promote new forms of business financing and ensure that innovation policies support young innovative firms. Reform bankruptcy procedures.
More in Chapter 1 of the Economic Assessment
27
Recommendations to make growth more inclusive
Improve labour market inclusiveness by lowering employer social security contributions on low-skilled workers, providing them in-work benefits while maintaining their entitlements and increasing access to lifelong learning.
Implement the plans in the “New Social Model” to reform labour regulations and temporary income support for the unemployed.
Strengthen active labour market programmes and the capacities of public employment services to implement programmes to get people back to work.
Increase the income support to social assistance recipients while strengthening work incentives.
Further promote healthy lifestyles and primary care services especially in rural areas
More in Chapter 2 of the Economic Assessment
More Information…
www.oecd.org/eco/surveys/economic-survey-lithuania.htm
OECDOECD Economics
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.
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