Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Lithuania and delivering a Council opinion on the 2023 Stability Programme of Lithuania
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Lithuania, economic policy, economic recovery, economic reform, energy policy, fiscal policy, health care, social policy, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 615 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Lithuania and delivering a Council opinion on the 2023 Stability Programme of Lithuania {SWD(2023) 615 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Lithuania and delivering a Council opinion 
on the 2023 Stability Programme of Lithuania 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 
121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the 
surveillance of budgetary positions and the surveillance and coordination of economic policies1, and in 
particular Article 5(2) thereof, 

Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 
November 2011 on the prevention and correction of macroeconomic imbalances2, and in particular 
Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investment,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022, in accordance with 
Article 11(2) of Regulation (EU) 2021/241.  

1 
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3 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey4,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the survey around the 
four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the  2023  Alert  Mechanism  Report,  in  which  it  identified  Lithuania  as  one  of  the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. On the same date, the Commission 
also  adopted  an  opinion  on  Lithuania’s  2023  draft  budgetary  plan.  The  Commission 
also adopted a recommendation for a Council recommendation on the economic policy 
of the euro area, which the Council adopted on 16 May 2023, as well as the proposal 
for  the  2023  Joint  Employment  Report  analysing  the  implementation  of  the 
Employment  Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights, 
which the Council adopted on 13 March 2023.  

(3)  While the EU economies  are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and inclusive growth, safeguard macroeconomic stability and increase resilience in the 
medium  term.  It  also  focuses  heavily  on  increasing  the  EU’s  competitiveness  and 
productivity. 

(4) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial  Plan  for  the  Net-Zero  Age5  to  boost  the  competitiveness  of  the  EU’s  net-
zero  industry  and  support  the  fast  transition  to  climate  neutrality.  The  plan 
complements  ongoing  efforts  under  the  European  Green  Deal  and  REPowerEU.  It 
aims to provide a more supportive environment for scaling up the EU’s manufacturing 
capacity  for  the  net-zero  technologies  and  products  required  to  meet  the  EU’s 
ambitious climate targets, as well as ensuring access to relevant critical raw materials, 
including  by  diversifying  sourcing,  properly  exploiting  geological  resources  in 
Member States and  maximising the recycling of raw materials.  The plan  is  based on 
four pillars:  a predictable and simplified regulatory  environment,  speeding up access 
to finance, enhancing skills, and open trade for resilient supply chains. On 16 March 
2023,  the  Commission  also  issued  the  Communication  Long-term  competitiveness  of 
the EU: looking beyond 20306, structured along nine mutually reinforcing drivers with 
the objective to work towards a growth enhancing regulatory framework. It sets policy 
improvements,  well  focused 
priorities  aimed  at  actively  ensuring  structural 
investments and regulatory measures for the long-term competitiveness of the EU and 
its Member States. The recommendations below help address those priorities. 

(5) 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 

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COM(2022) 780 final. 
COM(2023) 62 final.  
COM(2023) 168 final.  

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(6) 

(7) 

for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) 2021/241.  
The REPowerEU Regulation7 adopted on 27 February 2023 aims to rapidly phase out 
the  EU’s  dependence  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve the REPowerEU objectives. They will also help boost the competitiveness of 
the EU’s net-zero industry as outlined in the Green Deal  Industrial Plan for the Net-
Zero Age and address the energy-related country-specific recommendations issued to 
the  Member  States  in  2022  and,  where  applicable,  in  2023.  The  REPowerEU 
Regulation  introduces  a  new  category  of  non-repayable  financial  support,  made 
available  to  Member  States  to  finance  new  energy-related  reforms  and  investments 
under their recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination8.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023 stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels,  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
price  pressures,  Member  States  should  target  such  measures  much  better  than  in  the 
past  towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the 
fiscal  recommendations would be quantified and differentiated and be formulated on 
the basis of net primary expenditure as proposed in its Communication on orientations 
for  a  reform  of  the  EU  economic  governance  framework9.  It  recommended  that  all 
Member States should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

(8) 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive reform of the EU’s economic governance rules. The central objective 
of the proposals is to strengthen public debt sustainability and promote sustainable and 
inclusive growth in all Member States through reforms and investments. The proposals 

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Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 
Member  States  deliver  on  the  commitments  undertaken  in  their  medium-term  fiscal-
structural plans. The objective is to conclude the legislative work in 2023. 

On 14 May 2021, Lithuania submitted its national recovery and resilience plan to the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 20 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for Lithuania10. The release of instalments is conditional 
on  a  decision  by  the  Commission,  taken  in  accordance  with  Article  24(5)  of 
Regulation  (EU)  2021/241,  that  Lithuania  has  satisfactorily  fulfilled  the  relevant 
milestones  and  targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory 
fulfilment  presupposes  that  the  achievement  of  preceding  milestones  and  targets  has 
not been reversed. 

(10)  On 27 April 2023, Lithuania submitted its 2023 National Reform Programme and, on 
28 April 2023, its 2023 Stability Programme, in  line with  Article 4(1) of Regulation 
(EC)  No  1466/97.  To  take  account  of  their  interlinkages,  the  two  programmes  have 
been  assessed  together.  In  accordance  with  Article  27  of  Regulation  (EU)  2021/241, 
the 2023 National Reform Programme also reflects  Lithuania’s biannual reporting on 
the progress made in achieving its recovery and resilience plan.  

(11)  The Commission published the 2023 country report for Lithuania11 on 24 May 2023. It 
assessed  Lithuania’s  progress 
relevant  country-specific 
in  addressing 
recommendations  adopted by  the Council between 2019 and 2022 and took stock  of 
Lithuania’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new and emerging challenges. It also assessed Lithuania’s progress on implementing 
the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.  

the 

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Lithuania and published its results on 24 May 202312. It concluded 
that  Lithuania  is  not  experiencing  macroeconomic  imbalances.  In  particular, 
vulnerabilities  relating  to  price  competitiveness,  external  balances  and  house  price 
developments have recently increased but overall seem to be contained at present. The 
economy  was  strongly  affected  by  the  energy  price  shock  with  inflation  rising  fast; 
however, Lithuania’s competitiveness is projected to recover slowly as energy prices 
are  falling.  The  current  account  deteriorated  markedly  in  2022  on  account  of  the 
increased  energy  import  prices  but  is  forecast  to  move  close  to  balance  this  year. 
Going  forward,  mild  current  account  deficits  will  not  compromise  external 
sustainability  given  its  sound  stock  position.  Nonetheless,  inflation  and  wage 
pressures, if persistent, risk impairing Lithuania’s competitiveness, particularly as core 

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Council Implementing Decision of 20 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Lithuania (ST 10477/2021; ST 10477/2021 ADD 1). 
SWD(2023) 615 final. 
SWD(2023) 637 final. 

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inflation is well above the euro area average. House prices have grown strongly since 
the pandemic, but there is no evidence of overvaluation and prices are now moderating 
given  the  interest  rate  rises  and  the  economic  recession  underway.  In  addition, 
household debt is low, and the banking sector is well capitalised, highly profitable and 
records low non-performing loans.  The policy setting is  overall favourable, although 
some  policies  could  help  to  address  the  risks  from  the  identified  vulnerabilities. 
Continued  counter-cyclical  fiscal  and  macroprudential  policies,  reinforced  when 
needed, would be important in that respect. At the same time, more focus on fostering 
competition in the domestic market and policies to increase the quality and quantity of 
labour supply could help to manage price and unit labour cost pressures.  

(13)  Based  on  data  validated  by  Eurostat,13  Lithuania’s  general  government  deficit 
decreased from 1.2% of GDP in 2021 to 0.6% in 2022, while general government debt 
fell from 43.7% of GDP at the end of 2021 to 38.4% at the end of 2022.  

(14)  The  general  government  balance  has  been  impacted  by  the  fiscal  policy  measures 
adopted to mitigate the economic and social impact of the increase in energy prices. In 
2022,  such  revenue-decreasing  measures  included  VAT  compensations  for  district 
heating  for  households,  while  such  expenditure-increasing  measures  included  price 
caps for electricity tariffs for household and non-household and for natural gas tariffs 
for household consumers, and subsidies to companies operating in sectors affected by 
high  energy  prices.  The  Commission  estimates  the  net  budgetary  cost  of  these 
measures  at  1.3%  of  GDP  in  2022.  The  general  government  balance  has  also  been 
impacted  by  the  budgetary  cost  of  temporary  protection  to  displaced  persons  from 
Ukraine, which is estimated at 0.3% of GDP in 2022. At the same time, the estimated 
cost of COVID-19 temporary emergency measures dropped to 0.4% of GDP in 2022, 
from 0.6% in 2021. 

(15)  On  18  June  2021,  the  Council  recommended  that  in  2022  Lithuania14  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience  Facility,  and  preserve  nationally  financed  investment.  The  Council  also 
recommended Lithuania to keep the growth of nationally financed current expenditure 
under control. 

(16)  According 

to 

the  fiscal  stance15 

the  Commission  estimates, 

in  2022  was 
contractionary, at 0.9% of GDP, which was appropriate in a context of high inflation. 
As  recommended  by  the  Council,  Lithuania  continued  to  support  the  recovery  with 
investments  financed  by  the  Recovery  and  Resilience  Facility.  Expenditure  financed 
by Recovery and Resilience Facility grants and other EU funds amounted to 1.1% of 
GDP  in  2022  (1.3%  of  GDP  in  2021).  Nationally  financed  investment  provided  a 
neutral  contribution  to  the  fiscal  stance.16  Lithuania  therefore  preserved  nationally 
financed investment, as recommended by the Council. At the same time, the growth in 

13 

14 

15 

16 

Eurostat-Euro Indicators, 47/2023, 21.4.2023 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Lithuania, OJ C 304, 29.7.2021, p. 68. 
The  fiscal  stance  is  measured  as  the  change  in  primary  expenditure  (net  of  discretionary  revenue 
measures), excluding Covid-19 crisis-related temporary emergency measures but including expenditure 
financed  by  non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds, 
in 
the Fiscal Statistical Tables.   

growth. For  more 

to  medium-term 

see  Box 1 

potential 

relative 

details 

Other nationally financed capital expenditure  provided an expansionary contribution of 0.2 percentage 
points of GDP. 

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nationally  financed  primary  current  expenditure  (net  of  new  revenue  measures) 
provided  a  contractionary  contribution  of  0.9  percentage  points  to  the  fiscal  stance. 
Lithuania  therefore  sufficiently  kept  under  control  the  growth  in  nationally  financed 
current expenditure. 

(17)  The macroeconomic scenario underpinning the budgetary projections  in  the Stability 
Programme is realistic. The government projects real GDP to  grow by 0.5% in 2023 
and 3.0% in 2024. By comparison, the Commission 2023 spring forecast projects the 
same real GDP growth of 0.5% in 2023 and a lower real GDP growth of 2.7% in 2024, 
mainly due to a relatively slower projected growth in consumption and investment in 
2024. 

(18) 

In its 2023 Stability Programme, the government expects that the general government 
deficit  ratio  will  increase  to  2.2%  of  GDP  in  2023.  The  increase  in  2023  mainly 
reflects expenditure-increasing measures  aiming to support lower income households 
(such as increases in social benefits and pensions), as well as estimated lower tax and 
social  security  contributions  revenues  (as  a  share  of  GDP).  According  to  the 
Programme,  the  general  government  debt-to-GDP  ratio  is  expected  to  decrease  from 
38.4% at the end of 2022 to 37.8% at the end of 2023. The Commission 2023 spring 
forecast projects a government deficit of 1.7% of GDP for 2023. This is lower than the 
deficit projected in the Stability Programme, mainly due to higher projection of social 
security  contributions  revenues  and  slightly  lower  projections  of  government 
expenditures on intermediate consumption and on investment. The Commission 2023 
spring  forecast  projects  a  lower  general  government  debt-to-GDP  ratio,  of  37.1%  at 
the end of 2023. The difference is due to a lower projected government deficit. 

(19)  The  government  balance  in  2023  is  expected  to  continue  to  be  impacted  by  the 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices.  They  consist  of  measures  extended  from  2022  (in  particular:  price  caps  for 
electricity  and  natural  gas  tariffs  for  household  and  non-household  consumers).  The 
net budgetary cost of the support measures is projected in the Commission 2023 spring 
forecast at 0.7% of GDP in 202317. The measures in 2023 do not appear targeted to the 
most  vulnerable  households  or  firms,  and  do  not  preserve  the  price  signal  to  reduce 
energy  demand  and  increase  energy  efficiency.  As  a  result,  there  are  no  targeted 
support  measures  to  be  taken  into  account  in  the  assessment  of  compliance  with  the 
recommendation  for  2023.  The  budgetary  cost  of  temporary  protection  to  displaced 
persons  from  Ukraine  is  projected  to  remain  stable  compared  in  2023,  at  0.3%  of 
GDP. 

(20)  On 12 July 2022, the Council recommended18 that Lithuania takes action to ensure in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance19,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people fleeing Ukraine. Lithuania should stand ready to adjust current spending to the 
evolving situation. Lithuania was also recommended to expand public investment for 
the  green  and  digital  transitions,  and  for  energy  security  taking  into  account  the 

17 

18 

19 

The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as – where relevant – capital expenditure measures. 
Council Recommendation of 12 July 2022 on the  2022 National Reform Programme of  Lithuania and 
delivering a Council opinion on the 2022 Stability Programme of Lithuania, OJ C 334, 1.9.2022, p. 120.  
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Lithuania, which is used to measure the fiscal stance, is estimated at 14.0% in nominal terms. 

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REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and  Resilience 
Facility and other Union funds. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary  (- 0.8%  of  GDP),  in  a  context  of  high  inflation.  This  follows  a 
contractionary  fiscal  stance  in  2022  (+0.9%  of  GDP).  The  growth  in  nationally 
financed primary current expenditure (net of discretionary revenue measures) in 2023 
is  projected  to  provide  a  contractionary  contribution  of  0.4  %  of  GDP  to  the  fiscal 
stance.  In  sum,  the  projected  growth  of  nationally  financed  primary  current 
expenditure  is  in  line  with  the  Council  recommendation.  Expenditure  financed  by 
Recovery and Resilience Facility grants and other EU funds is projected to amount to 
2.0% of GDP in 2023, while nationally financed investment is projected to provide an 
expansionary  contribution  to  the  fiscal  stance  of  0.1  percentage  points20.  Therefore, 
Lithuania plans to finance additional investment through the Recovery and Resilience 
Facility  and  other  EU  funds,  and  it  is  projected  to  preserve  nationally-financed 
investment. It plans to finance public investment for the green and digital transitions, 
and  for  energy  security,  such  as  investment  in  the  development  of  local  renewable 
energy  sources,  and  installation  of  the  electricity  storage  infrastructure,  which  will 
facilitate Lithuania’s efforts to disconnect from the electricity grid, which operates in a 
synchronous  mode  with  the  Russian  and  Belarussian  systems.  These  investment 
projects are partly funded by the Recovery and Resilience Facility and other EU funds. 

(22)  According  to  the  Stability  Programme  the  general  government  deficit  is  expected  to 
decline to 1.7% of GDP in 2024. The decrease in 2024 mainly reflects the phasing out 
of the measures adopted to mitigate the economic and social impact of the increase in 
energy  prices.  The  programme  expects  the  general  government  debt-to-GDP  ratio  to 
decrease to 37.7% at the end of 2024. Based on policy measures known at the cut-off 
date  of  the  forecast,  the  Commission  2023  spring  forecast  projects  a  government 
deficit  of  1.4%  of  GDP  in  2024.  This  is  lower  than  the  deficit  ratio  projected  in  the 
programme,  mainly  due 
intermediate 
consumption  and  stronger  nominal  GDP.  The  Commission  2023  spring  forecast 
projects a lower general government debt-to-GDP ratio, of 36.6% at the end of 2024. 

lower  government  expenditure  on 

to 

(23)  The  Stability  Programme  envisages  the  phasing  out  of  most  of  the  energy  support 
measures in 2024. The Commission also assumes the phasing out of almost all energy 
support measures (net cost of 0.1% of GDP in 2024). These estimates hinge upon the 
assumption of no renewed energy price increases. 

(24) 

In the programme,  Lithuania plans to  meet  the medium-term  budgetary objective  -  a 
structural budget balance of - 1.0% of GDP21 - in 2023 and to maintain it throughout 
the rest of the programme period. Based on the Commission 2023 spring forecast, the 
structural  balance  is  forecast  at  -0.6%  of  GDP  in  2023  and  -0.3%  of  GDP  in  2024, 
above  the  medium-term  budgetary  objective.  Prudent  fiscal  policy  in  2024  will  also 
contribute to reducing core inflation, which is  well above the euro area average, and 
which could lead to competitiveness losses if persistent. 

(25)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 

nationally financed primary expenditure to grow at 2.7% in 2024. 

20 

21 

Other  nationally  financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.2 percentage points of GDP. 

The structural balance (cyclically-adjusted balance net of one-off and temporary measures) recalculated 
by the Commission using the commonly agreed  methodology points to a structural deficit of  0.6% of 
GDP in 2023 and 0.2% in 2024. 

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(26)  According  to  the  programme,  government  investment  is  expected  to  decrease  from 
4.0% of GDP in 2023 to 3.9% of GDP in 2024. The lower investment reflects lower 
nationally financed investment and investment financed by the EU. 

(27)  The Stability Programme outlines a medium-term fiscal path until 2026. According to 
the  programme,  the  general  government  deficit  is  expected  to  gradually  decline  to 
1.4%  of  GDP  in  2025  and  to  0.9%  by  2026.  The  general  government  deficit  is 
therefore  planned  to  remain  below  3%  of  GDP  over  the  programme  horizon. 
According to the programme, the general government debt-to-GDP ratio is expected to 
increase from 37.7% at the end of 2024 to 38.6% by the end of 2026. 

(28)  Lithuania’s  tax  revenue  as  a  share  of  GDP  is  significantly  below  the  EU  average, 
limiting  the  funding  available  for  public  expenditure  on  healthcare,  social  protection 
and  general  public  services.  The  VAT  gap  (the  difference  between  expected  VAT 
revenue and the amount collected) is  still one of the highest  in  the EU,  even though 
preliminary estimates show that it might have decreased significantly in 2021. In 2021, 
revenues from property taxes, which are among the taxes least detrimental to growth, 
amounted  to  only  0.3%  of  GDP,  around  seven  times  lower  than  the  EU  average. 
Lithuania  collected  half  the  EU  average  from  corporate  income  taxes  (as  a  share  of 
GDP), had some of the lowest transport taxes in the EU and is one of the few Member 
States  without  an  annual  car  tax.     Public  spending  on  social  protection  increased  in 
2015-2021,  but  is  still  significantly  below  the  EU  average.  This  translates  into 
relatively  low  levels  and  limited  coverage  of  social  benefits,  with  old-age  pensions 
among the lowest in the EU relative to employment incomes. Expenditure on general 
public services is particularly low, receiving almost half the funding (as a percentage 
of GDP) than the EU average.  Inadequate financial resources for healthcare result in 
long waiting times and high levels of unmet needs for medical care, high out-of-pocket 
costs  for  patients  and  the  inability  to  offer  competitive  salaries  to  healthcare 
introduced  several  major  permanent 
professionals. 
expenditure  measures  (such  as  increases  in  public  sector  wages,  pensions,  and  other 
social benefits), which are not matched by corresponding  financing measures,  which 
might pose a risk to Lithuania’s fiscal sustainability in the long-term. 

In  2021-2023,  Lithuania 

(29) 

In accordance with Article 19(3), point (b) and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. The implementation 
of Lithuania’s recovery and resilience plan is well underway. On 30 November 2022, 
Lithuania  submitted  a  first  payment  request,  and  the  Commission  adopted  a  positive 
assessment for 31 out of 33 milestones covering six of the plan’s seven components, 
while two milestones related to tax reforms have been assessed to be not satisfactorily 
fulfilled. The Commission has therefore activated the ‘payment suspension’ procedure 
that gives Lithuania additional time to fulfil these milestones, while receiving a partial 
payment of EUR 542.3 million (net of prefinancing) linked to the milestones that have 
been satisfactorily fulfilled. As a result of objective circumstances related to increases 
in the prices of energy and construction materials, and supply chain constraints due to 
Russia’s aggression against Ukraine, Lithuania intends to submit modifications to the 
plan,  as  well  as  a  REPowerEU  chapter  to  accelerate  the  decarbonisation  of  the 
economy and reduce dependence on fossil fuels. In accordance with Article 14(6) of 
Regulation  (EU)  2021/241,  on  30  March  2023,  Lithuania  expressed  its  intention  to 
request  EUR 1 800 000 000  of  additional  loan  support  under  the  Recovery  and 
Resilience  Facility.  The  swift  inclusion  of  the  new  REPowerEU  chapter  in  the 
recovery  and  resilience  plan  will  allow  additional  reforms  and  investments  to  be 

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financed  in  support  of  Lithuania’s  strategic  objectives  in  the  field  of  energy  and  the 
green  transition.  The  systematic  and  effective  involvement  of  local  and  regional 
authorities,  social  partners  and  other  relevant  stakeholders  remains  important  for  the 
successful  implementation  of  the  recovery  and  resilience  plan,  as  well  as  other 
economic and employment policies going beyond the plan, to ensure broad ownership 
of the overall policy agenda.  

(30)  The Commission approved all of Lithuania’s cohesion policy programming documents 
in 2022. Proceeding with the swift implementation of the cohesion policy programmes 
in  complementarity  and  synergy  with  the  recovery  and  resilience  plan,  including  the 
REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital  transition,  increasing 
economic and social resilience as well as achieving balanced territorial development in 
Lithuania. 

(31)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Lithuania  faces  a number of  additional challenges  related to  the health system, 
social services and social housing, energy and the green transition.  

(32)  Health  outcomes  in  Lithuania  show  one  of  the  lowest  life  expectancies  in  the  EU. 
Levels of preventable and treatable mortality in Lithuania remain high compared to the 
EU  average.  Lithuania  has  a  high  level  of  avoidable  hospital  admissions  and  the 
highest  rate  of  mortality  from  suicide  in  the  EU.  This  highlights  the  necessity  to 
improve the effectiveness of healthcare and the need for more preventive measures in 
the  Lithuanian  healthcare  approach.  The  challenges  in  the  healthcare  sector  are 
exacerbated  by  labour  shortages,  skills  mismatches  and  an  uneven  distribution  of 
health  professionals,  which  limit  access  to  and  the  provision  of  primary  healthcare. 
Lithuania’s  recovery  and  resilience  plan  includes  significant  measures  such  as  a 
reform  that  will  transform  the  hospital  network  and  emergency  medical  services,  as 
well as investment in modernising healthcare facilities and building infrastructure for 
infectious disease cluster centres. Once implemented, these measures are expected to 
help address some of the key challenges. However, beyond the measures included in 
the  recovery  and  resilience  plan,  additional  efforts  are  needed  to  further  strengthen 
primary  care  and  expand  preventive  care,  including  to  make  the  healthcare  system 
more resilient. 

(33)  The planning and delivery of social services is hindered by municipalities’ failure to 
sufficiently  involve  non-governmental  organisations  and  ineffective  integration  of 
social assistance and vocational training into active labour market policies, especially 
with regard to the unemployed. Lithuania achieved some progress by completing pilot 
projects  in  certain  municipalities  on  the  provision  of  integrated  services  for  the 
unemployed, and a recommendation was issued to all the municipalities to apply the 
methodology of these projects to their employment promotion programmes as of 2023. 
While  this  is  a  step  in  the  right  direction,  its  impact  is  yet  to  be  seen,  and  further 
efforts  are  needed.  The  recovery  and  resilience  plan  includes  significant  measures, 
such as a reform of the minimum income scheme and the tax-benefits system together 
with increasing the coverage of unemployment insurance. These are expected to help 
address  some  of  the  key  social  protection  challenges  once  implemented.  However, 
beyond  the  measures  included  in  the  plan,  further  efforts  are  needed  to  improve  the 
planning and delivery of social services. 

(34)  Access to social housing is limited in Lithuania. Around 9 700 families (almost 19 000 
people) were waiting for social housing at the end of 2022, with the average waiting 
time  5.85  years.  The  overall  quality  of  social  housing  remains  low.  Although 

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Lithuania  has  undertaken  some  reform  measures  on  social  housing,  including 
introducing  the  right  to  prioritise  single-parent  families,  increasing  the  income  and 
assets  limits  when  assessing  eligibility  and  adding  special  provisions  in  case  of  a 
national emergency or quarantine, an overall strategy on how to  tackle these chronic 
shortages and increase the quality of social housing is currently missing. 

(35)  Following  Russia’s  invasion  of  Ukraine,  Lithuania  has  successfully  abandoned 
imports  of  gas,  oil,  electricity  and  coal  from  Russia,  by  redirecting  energy  imports 
through  the  liquified  natural  gas  (LNG)  terminal  in  Klaipėda,  the  oil  terminal  in 
Būtingė, the new gas interconnection with Poland, the improved interconnection with 
Latvia, and the existing electricity interconnections with Poland, Latvia and Sweden. 
Lithuania’s consumption of natural gas dropped by 41% in the period between August 
2022  and  March  2023,  compared  with  the  average  gas  consumption  over  the  same 
period  in  the  preceding  5  years,  beyond  the  15%  reduction  target,  mostly  due  to  the 
fall  in  gas  demand  from  its  chemical  industry,  as  a  result  of  soaring  energy  prices. 
Lithuania  could  keep  pursuing  efforts  to  temporarily  reduce  gas  demand  until  31 
March  2024.22  Nevertheless,  Lithuania  remains  highly  dependent  on  imports  for  its 
energy supply. It imports around two-thirds of its gross electricity needs and almost all 
of  its  oil  and  gas.  Moreover,  oil  and  gas  represent  three-quarters  of  the  country’s 
energy mix. 

(36)  The  high  demand  for  energy  is  driven  by  a  large  and  old  transport  fleet,  with 
underused  public  transport  and  rail,  a  large  stock  of  energy-inefficient  buildings  and 
highly energy-intensive industries. Industry accounted for 58% of Lithuania’s total gas 
consumption before the energy crisis. Additional efforts to reduce energy intensity in 
these sectors by promoting industrial transformation, including innovative production 
processes and further promoting the use of renewable energy sources, would decrease 
Lithuania’s  dependence  on  energy  imports.  Incentives  to  choose  less  polluting 
vehicles  remain  weak  in  Lithuania,  while  the  public  transport  system  is  fragmented 
and suffers from a lack of coordination. Therefore, promoting less polluting means of 
transport remains a priority. At the same time, the renovation rates for multi-apartment 
buildings  remain  too  low  to  achieve  the  climate  neutrality  targets  in  the  sector  by 
2050. This demonstrates the need for improved procedures and incentives to renovate 
and for supporting the private sector’s capacity to run renovation projects.   Lithuania 
remains among the worst performers in the EU in terms of energy poverty, which may 
aggravate  further  in  case  another  sustained  increase  in  energy  prices  materialise  and 
slow pace of renovation continue.   

(37)  The  Lithuanian  electricity  network,  like  that  of  other  Baltic  Member  States,  remains 
exposed,  as  it  is  synchronised  with  the  BRELL  power  grid.  The  regional 
synchronisation of the electricity grid with the rest of the EU is making progress but 
still  needs  to  be  completed  (it  is  expected  to  be  completed  by  2025).  To  that  end, 
cooperation  with  Latvia  and  Estonia  is  necessary.  Lithuania  is  increasing  domestic 
energy  generation;  it  has  taken  steps  to  streamline  permitting  procedures  and  to 
promote electricity generation from renewable energy sources, which resulted in large 
increases in solar and wind production capacity between 2020 and 2021. However, a 
further  increase  in  ambition  for  reducing  greenhouse  gas  emissions  and  increasing 
renewable energy and energy efficiency targets is necessary for Lithuania to be in line 
with the ‘Fit for 55’ objectives. 

22 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706. 

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(38)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating  bottlenecks  in  the  transition  to  a  net-zero  economy.  High-quality  education 
and  training  systems  that  respond  to  changing  labour  market  needs  and  targeted 
upskilling and reskilling measures are key to reducing skills shortages and promoting 
labour inclusion and reallocation. To unlock untapped labour supply, these measures 
need  to  be  accessible,  in  particular  for  individuals  and  in  sectors  and  regions  most 
affected  by  the  green  transition.  Since  2015,  the  job  vacancy  rate  increased  in  most 
key  sectors,  such  as  construction  (from  0.8%  to  1.5%  in  2021)  and  manufacturing 
(from  1.4%  to  1.8%  in  2021).  However,  the  rate  in  2021  was  still  below  the  EU 
average  of  3.6%  and  1.9%,  respectively.  In  recent  years,  labour  shortages  were 
reported in  Lithuania for 28 occupations that require specific skills or knowledge for 
the  green  transition.  In  particular,  labour  shortages  were  reported  as  a  factor  that 
constrained production in industry and construction in 2022. 

(39) 

(40) 

In light of the Commission’s assessment, the Council has examined the 2023 Stability 
Programme and its opinion23 is reflected in recommendation (1) below.  

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union, the Council recommended that euro area Member States take action, including 
through  their  recovery  and  resilience  plans,  to  (i)  preserve  debt  sustainability  and 
refrain  from  broad-based  support  to  aggregate  demand  in  2023,  better  target  fiscal 
measures taken to mitigate the impact of high energy prices and reflect on appropriate 
ways to wind down support as energy price pressures diminish; (ii) sustain high public 
investment and promote private investment to support the green and digital transition; 
(iii)  support  wage  developments  that  mitigate  the  loss  in  purchasing  power  while 
limiting  second-round  effects  on  inflation,  further  improve  active  labour  market 
policies  and  address  skills  shortages;  (iv)  improve  the  business  environment  and 
ensure that energy support to companies is cost-effective, temporary, targeted to viable 
firms  and  that  it  maintains  incentives  for  the  green  transition;  and  (v)  preserve 
macro-financial-  stability  and  monitor  risks  while  continuing  to  work  on  completing 
the Banking Union. For Lithuania, recommendations (1), (2), (3) and (4) contribute to 
the implementation of the first, second and third euro area recommendations.  

HEREBY RECOMMENDS that Lithuania take action in 2023 and 2024 to:  

1. 

2. 

23 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023.  Should 
renewed  energy  price  increases  necessitate  support  measures,  ensure  that  these  are 
targeted  at  protecting  vulnerable  households  and  firms,  fiscally  affordable  and 
preserve incentives for energy savings.  

While  maintaining  a  sound  fiscal  position  in  2024,  preserve  nationally-financed 
public  investment  and  ensure  the  effective  absorption  of  RRF  grants  and  other  EU 
funds, in particular to foster the green and digital transitions. For the period beyond 
2024,  continue  to  pursue  investment  and  reforms  conducive  to  higher  sustainable 
growth and preserve a prudent medium-term fiscal position. 

Strengthen  the  adequacy  of  healthcare  and  social  protection  and  improve  general 
public services. 

Continue  the  steady  implementation  of  its  recovery  and  resilience  plan  and  swiftly 
finalise the REPowerEU chapter with a view to  rapidly starting its implementation. 

Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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3. 

4. 

Proceed  with  the  speedy  implementation  of  cohesion  policy  programmes,  in  close 
complementarity and synergy with the recovery and resilience plan. 

Strengthen  primary  care  and  expand  preventive  care,  including  to  make  the 
healthcare  system  more  resilient.  Improve  the  planning  and  delivery  of  social 
services. Improve access to and quality of social housing. 

Further  reduce  reliance  on  fossil  fuels  and  imported  energy  by  accelerating  the 
deployment  of  renewables,  in  particular  by  ensuring  sufficient  grid  capacity  and 
access,  ensuring  the  transformation  and  decarbonisation  of  industrial  production, 
increasing the uptake of public and sustainable transport and making buildings more 
energy  efficient,  also  to  reduce  energy  poverty.  Ensure  sufficient  capacity  of 
electricity  interconnections  to  increase  security  of  supply,  continuing  the  timely 
synchronisation  with  the  EU  electricity  grid.  Step  up  policy  efforts  aimed  at  the 
provision and acquisition of the skills needed for the green transition. 

Done at Brussels, 

For the Council 
The President 

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