Sustainable Policies


Economic Policies

Showing considerable progress in recent years, Lithuania receives high rankings (rank 11) in the area of economic policies. Its score on this measure has improved by 0.5 points since 2014.

Growth rates have been robust in recent years. Rises in energy prices and wages are becoming competitiveness challenges for Lithuanian companies. The government is focusing on large energy-system infrastructure projects.

Unemployment rates have declined steadily to moderate levels. A new labor code has made hiring and firing practices more flexible. Minimum wages have been steadily increased. Businesses are finding it increasingly difficult to find suitable skilled labor. The rise in hourly labor costs has far exceeded the EU-27 average. The country has a highly advanced fintech regulatory framework.

The country has one of the lowest tax-to-GDP ratios in the EU. A significant share of revenue is generated by the value-added tax, which is high by EU standards. Social security contributions exceed 30% of wages. The government has run small budgetary surpluses in recent years, with public debt stabilizing below 40% of GDP.

Social Policies

With gaps in its social safety net, Lithuania receives a middling overall score (rank 23) with regard to social policies. Its score on this measure is unchanged relative to its 2014 level.

Education quality is a concern, with students showing middling achievements, and a mismatch evident between graduates’ skills and labor-market needs. Demographic changes are producing strong declines in the annual number of school graduates. Poverty-risk and social-exclusion rates are high. New social-policy funding programs are targeting at-risk pensioners, children and low-income families.

Health outcomes are poor in cross-EU comparison. Out-of-pocket payments remain high, reducing access for some groups. The share of women employed is high, but child-poverty rates remain concerning, and child-care provision is insufficient. A variety of benefits for families and pregnant women have been increased.

The pension system does not adequately protect against poverty. Pension benefits have been increased. Immigration is comparatively rare, with most migrants coming from either Ukraine or Belarus. Defense spending has been increased to reach 2% of GDP.

Environmental Policies

Despite a high energy intensity, Lithuania scores well (rank 11) with regard to environmental policies. Its score on this measure is unchanged relative to its 2014 level.

The country’s greenhouse-gas emission reduction target is only 9%, compared to an EU-level target of 30%. Emissions in the country are nevertheless forecast to rise by 6% by 2030 as compared to 2005. Taxes on transport are the EU’s lowest. Climate-change program funds have been reallocated to increase public-employee salaries.

The proportion of energy produced from renewable sources is above 25%, exceeding the Europe 2020 target of 23%. The share in the heating sector was nearly 50% as of 2017. A national strategy contains further regulatory and financial incentives for the use of wind and solar energy, with a goal of basing all domestic energy production on renewables by 2050

Water-supply and sewage infrastructures have improved substantially. Wastewater treatment and waste disposal are weak areas. Lithuania has outlawed the use of electricity derived from Belarusian nuclear-power plants, and is trying to dissuade other Baltic countries from buying it.

Robust Democracy


Quality of Democracy

With free and fair electoral procedures, Lithuania receives a high overall ranking (rank 10) with regard to democracy quality. Its score on this measure is unchanged relative to its 2014 level.

Campaign-finance laws restrict corporate donations, and contributions must be made public. Penalties for violations have been increased, with a major party recently barred from fundraising for six months, but serious loopholes remain. State funding provides the largest share of party revenue. A referendum to amend the constitution to introduce dual citizenship failed to attract enough votes to be valid.

While the media is broadly independent of government influence, municipal governments have been able to limit the independence of regional media. Media-ownership concentration has increased over the last several years. While several major information-transparency initiatives have been passed, implementation has been slow.

Civil rights are officially protected, but poor prison conditions and intolerance for sexual and ethnic minorities are problematic. Weak public support has undermined the efficacy of anti-discrimination efforts. Lawmakers backtracked on an agreement to stabilize the tax code, prompting criticism from the business community. Corruption remains a concern.

Good Governance


Executive Capacity

Showing significant institutional-reform ability, Lithuania scores well (rank 8) with regard to executive capacity. Its score on this measure is unchanged relative to its 2014 level.

While strategic planning is well institutionalized, political and electoral calculations have often taken precedence. The reorganized government-office has ample sectoral-policy expertise. Line ministries have considerable autonomy, but work collaboratively with the prime minister’s office. The regularity of informal meetings has increased following a decision to make all official government meetings public.

The RIA process is generally disregarded by lawmakers. Digital coordination tools are well-developed. Public consultation is currently routine, but often superficial. Public use of an online consultation tool has been slow to build. The current government’s makeup of mostly nonpartisan ministers has led to internal tensions and troubles with coordinating communications, particularly in the run-up to elections.

A lack of reliable and comprehensive data on public-service provision hampers monitoring and standardization. Local and regional governments report some financial constraints in providing required services. Adaptability, particularly in the context of EU fund absorption, has been high. Some of the regulatory-quality gains associated with OECD accession are at risk of being reversed.

Executive Accountability

With a mixed record on oversight issues, Lithuania falls into the middle ranks internationally (rank 21) in the area of executive accountability. Its score on this measure has improved by 0.2 points since 2014.

Citizen policy knowledge is not highly developed, although public-education campaigns and efforts to improve information availability are ongoing. While the state-funded media produces some high-quality analysis, the media are in general distrusted.

While parliamentarians have considerable resources and strong formal oversight powers, the quality of laws suffers due to high number of laws passed. The audit office suffers from an excess of responsibilities. The several ombuds offices have taken an increasingly proactive approach to human-rights violations, and the data-protection authority is both independent and effective.

Key political parties have shifted to increasingly democratic means of selecting candidates and making decisions. Interest groups generally have limited ability to formulate well-crafted policies.
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