COMMISSION STAFF WORKING DOCUMENT 2023 Country Report – Lithuania Accompanying the document 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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 615 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report – Lithuania Accompanying the document 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 {COM(2023) 615 final}  
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Recovery hit by the economic 
fallout from Russia’s invasion of 
Ukraine 

In  2022,  economic  growth  in  Lithuania 
was  impeded  by  surging  inflation,  which 
reached  18.9%  and  was  among  the 
highest 
in  the  EU.  Russia’s  unjustified 
invasion  of  Ukraine  in  February  2022  created 
a surge in energy prices, which translated into 
broader  inflation  over  the  course  of  2022. 
Inflation  reached  a  peak  in  September  2022, 
at 22.5%, and eased slightly at the end of the 
year,  and  decreased  to  15.2%  in  March  2023 
(18.5% in January 2023) (1). Economic growth 
in  2022  was  1.9%,  with  a  contraction  in  the 
final  quarter,  driven  by  a  fall  in  households’ 
real  disposable  incomes (2),  a  concomitant 
decline  in  real  consumption  and  weakened 
international demand.  

inflation,  combined  with  rising 
High 
interest  rates  and  lacklustre  domestic 
and  international  demand,  are  set  to 
shape  economic  growth  going  forward, 
which  is  expected  to  remain  weak  in 
2023. Inflation is expected to remain elevated 
in  2023,  although  significantly  lower  than  in 
2022,  and  decelerate  by  2024.  Investment  is 
expected  to  contribute  positively  to  growth  in 
the  coming  years.  This  is  thanks  to  support 
from the Recovery and Resilience Facility (see 
Section  2)  and  a  significant  volume  of 
cohesion  policy  funds  in  2021-2027  (EUR  7.8 
billion).  However,  projections  for  growth  and 
inflation remain surrounded by significant risks 
tensions  and 
arising 
exposure  to  global  energy  developments. 

from  geopolitical 

(1)  Source: Eurostat in April 2023. 

Other  risks  that  warrant  monitoring  are  the 
formation  of  a  potential  wage-price  spiral, 
increased fragmentation of supply chains, and 
an increase in corporate bankruptcies.  

The labour market continued to recover in 
2022  and  is  expected  to  withstand  the 
economic  downturn.  The  activity 
rate 
rebounded in 2021 to pre-pandemic levels and 
has been increasing since then, partially due to 
the  high  employability  of  people  fleeing  the 
Russian aggression in Ukraine. This represents 
a  record  high  of  79.0%  in  2022,  well  above 
the  EU  average  (74.6%)  (see  Annex  14). 
However,  total  employment  is  projected  to 
decrease  slightly  in  2023,  after  peaking  at 
79.8%  of  the  working-age  population  in  Q3 
2022 (3), due to the impact of the energy crisis 
on  the  economy.  Similarly,  the  unemployment 
rate (15-74 years) fell to 5.5% in Q2 2022 (4), 
before  rising  slightly  in  the  next  quarter  and 
into  2023.  The  unemployment  rate  remains 
higher in towns and rural areas than in larger 
cities, and higher among low-skilled people.  

Skills  mismatches (5)  remain  an  obstacle 
to  employability,  competitiveness  and 
potential  growth.  Addressing  them  are 
essential for Lithuania’s digital and green 
transition. The labour supply continues to fall 
short  of  the  growing  demand.  The  rate  of  job 
vacancies  stood  at  1.9%  in  Q3  2022,  almost 
on par with the record level of 2% recorded in 
Q3  2008,  thus  putting  upward  pressure  on 
wages  and  posing  a  risk  to  productivity  in 
(see  Annex  12).  
labour-intensive  sectors 
Tightness  in  the  labour  market  in  2022, 
measured as the ratio of job vacancies to the 
number  of  unemployed  people,  was  at  its 
highest  in  15  years.  This  points  to  skills 

(3)  Source: Eurostat in May 2023. 

(4)  Source: Eurostat in May 2023. 

(2)  A real value is one which has been adjusted for 

(5)  Skills mismatch is a discrepancy between the skills that 

inflation, enabling comparison of quantities as if the 
prices of goods had not changed on average. 

are sought by employers and the skills that are 
possessed by individuals. 

2 

 
 
                                                 
                                                 
mismatches and skills shortages, which are of 
great  concern  to  Lithuanian  firms  (76%  of 
those  polled  in  the  2022  EIB  investment 
survey),  especially  in  the  construction  sector 
(ECFIN  business  and  consumer  survey). 
Nevertheless,  the  data  from  Q4  2022  show 
that  the  tension  in  the  labour  market  has 
decreased. 

Graph 1.1: Selected labour market indicators 

Source: Eurostat 

inflation 

Lithuania’s  GDP  per  capita  is  below  the 
EU  average  but  is  converging  with  it 
relatively  well.  However, 
is 
putting  pressure  on  real  wages.  In  2021, 
Lithuania’s GDP per capita was 89% of the EU 
average, which equalled Estonia’s and was 17 
percentage points higher than Latvia’s. During 
the last decade, Lithuania’s real compensation 
per  employee  has  outperformed  productivity 
growth,  despite  both  being  consistently  above 
the  EU  average.  Nominal  wages  grew  by 
11.9%  in  2021  and  11%  in  2022.  However, 
real  wages  started  to  fall  in  2022  amid  high 
inflation,  after  increasing  in  both  2020  and 
2021  by  more  than  5%.  A  strong  increase  in 
(13.7%) (6)  and 
nominal  minimum  wages 
increased  non-taxable  amount  applicable  for 
personal  income  tax  purposes  helped  offset 
the  impact  of  inflation  for  people  earning the 
minimum  wage,  which  represents  a  smaller 
decline  in  real  terms  compared  to  the  EU 
average.  

(6)  This represents the second largest increase in the EU. 

the 

and 

(albeit 

existing 

Lithuania  has  successfully  overcome  its 
dependency  on  Russian  energy  but 
reliant  on  energy 
remains  heavily 
imports.  Following  Russia’s 
invasion  of 
Ukraine, Lithuania has successively abandoned 
imports  of  gas,  oil,  electricity  and  coal  from 
Russia  by  redirecting  energy  imports  through 
the  LNG  terminal  in  Klaipėda,  the  oil  terminal 
in  Būtingė,  the  new  gas  interconnection  with 
Poland,  the  enhanced  interconnection  with 
Latvia, 
electricity 
interconnections  with  Poland,  Latvia  and 
imports 
Sweden.  However,  Lithuania  still 
around  two  thirds  of  its  electricity,  due  to 
insufficient 
domestic 
electricity generation. This exposure to imports 
has  contributed  to  record  energy  prices  (a 
190%  increase  in  wholesale  prices)  and  a 
corresponding  surge  in  inflation  (18.9%  in 
2022).  To  mitigate  this,  Lithuania  has  set  an 
ambition 
the  generation  of 
electricity  from  renewable  sources  to  70%  of 
total  domestic  electricity  consumption  by 
2030  and  100%  by  2045,  and  is  currently 
planning  to  advance  the  targets  even  further. 
At the same time, Lithuania, with Estonia and 
Latvia,  is  still  part  of  the  BRELL  electricity 
network  controlled  by  Moscow.  This  poses  a 
geopolitical  risk  that  could  be  tackled  most 
effectively  by  joining  the  EU  electricity  grid. 
Lithuania  is  preparing  to  join  the  network  by 
2025.  

increasing) 

increase 

to 

Lithuania’s  economy  is  susceptible  to 
energy  shocks  because  it  relies  on  the 
energy-intensive  production  of  low  and 
medium  value-added  goods  and  services. 
Low prices for energy and other resources, and 
(to  a  certain  extent)  low  labour  costs,  play  a 
in  keeping  Lithuania’s  economy 
key  role 
competitive.  However, 
recent  sharp 
the 
increase  in  energy  prices  and  the  continued 
convergence  of  wages  with  the  EU  average 
puts  the  sustainability  of  this  growth  model 
into  question.  Lithuania’s  export  industry  is 
energy-intensive  (the  biggest  export  sectors 
are  mineral  products  and  transport  services) 
and, therefore, more vulnerable to energy price 
shocks. 

As  assessed  in  the  in-depth  review  of 
Lithuania, vulnerabilities relating to price 
competitiveness,  external  balances  and 

3 

79.85.570.572.574.576.578.580.582.584.50510152025Activity rate 20-64 (rhs)Unemployment rate 15-74 (rhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-29 (lhs)LT%% 
  
                                                 
general 

general  government  debt  and  deficit  was 
beginning  to  improve  in  2021  and  2022. 
However, due to increases in national defence 
expenditure  following  the  Russian  invasion  of 
Ukraine,  adoption  of  measures  to  protect 
households’ disposable incomes, and increases 
in 
intermediate 
government 
consumption and investments, the government 
deficit is projected to increase to 1.7% of GDP 
in  2023  (1.1  p.p.  higher  than  in  2022).  The 
deficit  is  projected  to  decline  to  1.4%  of  GDP 
in 2024 as measures to mitigate the impact of 
high  energy  prices  are  phased  out.  Due  to 
denominator effects, public debt is forecast to 
decrease by 1.3 p.p.  and reach 37.1% of GDP 
in  2023,  and  36.6%  in  2024.  The  budget 
deficit  and  debt  estimates  for  2024  is  under 
high  uncertainty  and  will  be  dependent  on 
developments in energy prices. 

To  mitigate  the  economic  and  social 
impact  of  high  energy  prices,  Lithuania 
adopted  a  package  of  costly  and  mostly 
untargeted  temporary  support  measures. 
These  measures  are  projected  to  amount  to 
around 1.3% of GDP in 2022 and 0.7% of GDP 
in  2023.  Almost  all  of  the  measures  were 
untargeted  and  did  not  include  incentives  to 
reduce  energy  demand  and  increase  energy 
efficiency. 
government 
introduced temporary universal electricity price 
the 
caps 
international  competitiveness  of  its  energy 
intensive  industries.    Reimbursement  of  VAT 
on district heating and electricity price caps on 
household  energy  consumption  were  brought 
in  to  alleviate  the  negative  social  impact  of 
high energy prices.  

for  businesses 

to  preserve 

Lithuanian 

The 

Some  crisis-related  increases  in  current 
government  spending  are  of  a  lasting 
nature,  for  which  corresponding  revenue 
In  2022-2023, 
sources  are  needed. 
Lithuania  adopted  a  package  of  permanent 
to  protect 
expenditure  measures  aiming 
the 
households’  disposable 
in 
in 
situation  of  high 
pensions,  other  social  benefits,  and  public 
sector  wages),  which  are  not  offset  by 
revenue  measures.  Without 
corresponding 
these 
additional 
government spending commitments may pose 

revenue  measures, 

(increases 

incomes 

inflation 

rates.  Even 

house  price  developments  are  increasing 
but  seem  to  be  contained.  (7)  Increasing 
energy and food prices, along with increases in 
unit  labour  costs,  have  helped  to  push  up  all 
measures  of  inflation  in  2022 (8),  with  a 
divergence  between  Lithuania  and  other  euro 
area  countries  in  core  inflation  that  may  be 
difficult  to  eliminate.  As  wages  have  been 
growing  faster  than  productivity  over  the  last 
decade,  this  led  to  a  gradual  increase  in  unit 
labour  costs  and  an  appreciation  of  real 
effective  exchange 
though 
Lithuania’s  current  account  has  remained 
broadly in balance since the financial crisis of 
2008,  the increasing  prices  of  energy  imports 
translated  into  a  current  account  deficit  in 
2022. In addition, over the last decade, house 
prices  have  doubled  in  nominal  terms,  with 
50% of this increase occurring over the last 3 
years (9).  Despite 
the 
Commission’s  valuation  methodology,  house 
prices  do  not  appear  to  be  overvalued  on 
average.  Furthermore,  in  the  face  of  falling 
energy  prices  and  the  tightening  of  financial 
conditions, 
to 
inflation 
moderate  and  the  current  account  deficit  to 
improve. However, the fundamental  drivers of 
from  productivity  are 
wage  divergence 
expected to persist (see Annex 22). 

this,  according 

is  expected 

the 

to 

Increased spending during the 
consecutive crises continues to 
weigh on public finances 

The energy price shock hit public finances 
at  a  time  when  they  had  not  fully 
recovered  from  the  COVID-19  pandemic. 
Even 
triggered  a 
the  pandemic 
considerable increase in government spending 
to  support  businesses  and  households,  the 

though 

(7)   European Commission (2023), In-Depth Review for 
Lithuania, Commission staff working document 
(COM(2023) 637 final),   

(8)  European Commission (2023), Inflation Differentials in 
Europe and Implications for Competitiveness: Thematic 
Note to Support In-Depth Reviews, COM (2023) 
Institutional Paper 198. 

(9)  European Commission (2023), Housing Market 

Developments: Thematic Note to Support In-Depth 
Reviews, COM (2023) Institutional Paper 197. 

4 

 
                                                 
a risk to Lithuania’s fiscal sustainability in the 
long-term. 

Addressing the remaining socio-
economic challenges as a basis for 
sustainable growth 

of  the  EU  average.  Since  2011,  Lithuania  has 
experienced  one  of  the  highest  levels  of 
depopulation  in  the  EU,  mainly  as  a  result  of 
natural change and also due to people moving. 
However,  population  changes  are  not  equally 
distributed  across 
the 
population increasing in the capital region and 
falling rapidly in more remote regions.  

the  country,  with 

services 

adequate 

Providing 
is 
particularly challenging in the areas that 
are  far  from  the  regional  centres.  Due  to 
lack  of  a  skilled  workforce  and 
the 
depopulation  in  most  counties,  it  is  becoming 
increasingly  difficult 
to  provide  quality 
healthcare,  education,  social  and  other 
administrative services in an efficient manner, 
and  to  speed  up  economic  development.  The 
situation  calls  for  further  consolidation  and 
concentration  of 
resources,  and  better 
cooperation  between  municipalities,  combined 
with  more  efforts  to  ensure  better  public 
transport.  So  far,  there  has  been  a  lack  of 
effective  territorial  development  strategies 
and  coordination  at  regional 
level.  Local 
authorities  are  currently  preparing  integrated 
territorial  development  strategies 
to  be 
supported  by  the  2021-2027  EU  cohesion 
policy  funds.  These  strategies  would  include 
initiatives  agreed  by  groups  of  municipalities 
and could lead to better public services across 
the whole territory covered by the strategies. 

is 

improving  on 

several 
Lithuania 
Sustainable  Development  Goal 
(SDG) 
indicators,  and  is  approaching  the  EU 
averages for them. Progress has been made 
on energy productivity, but it is still lower than 
the EU average. Lithuania is also improving on 
SDG  indicators  on  fairness.  Lithuania  has 
reduced the risk of poverty or social exclusion, 
though  the  risk  is  still  higher  than  the  EU 
average. The country underperforms on almost 
all  indicators  for  good  health  and  well-being, 
though  some  progress  has  been  made  in 
standardised  avoidable  mortality  (see  Annex 
16). Lithuania performs well or is improving on 
SDG  indicators  on  productivity.  However,  the 
performance  of  the  health  system  is  likely  to 
have a negative effect on productivity because 
of  its  impact  on  the  health  of  people  of 
working  age.  Lithuania  is  making  progress  on 
education,  though  further  efforts  are  needed 

in  the  EU. 

in  Lithuania 

Even  though  at-risk-of-poverty  rate  has 
been  slightly  decreasing,  it  remains  one 
Income 
of  the  highest 
inequality 
remains  at 
critically  high  levels  as  reflected  in  the 
Social  Scoreboard  with  income  of  the 
richest 20% of the Lithuanian population 
over  six  times  higher  than  that  of  the 
poorest  20% 
in  2021.  Lithuania’s  tax 
revenue as a share of GDP is one of the lowest 
in  the  EU,  even though it has  been increasing 
steadily in 2017-2022. Correspondingly, public 
spending  on  social  protection  has  been  also 
increasing, but it is still significantly lower than 
the  EU  average.  Social  transfers  in  Lithuania 
are  less  effective  at  reducing  poverty  and 
inequality than in other EU countries (10), even 
though its effectiveness has been increasing in 
the  previous  years.  The  tax  system  became 
slightly  more  effective  in  reducing  income 
inequality  in  the  period  of  2015-2019  (the 
latest  available  data),  however,  its  impact 
remains  relatively  small  in  comparison  to 
other  EU  countries (11).  Public  services  in  the 
areas  of  health  care  and  general  public 
services  are  hindered  by  a  structural  under-
funding, 
and 
accessibility. 

hampering 

quality 

its 

There  are  significant  regional  disparities 
in  productivity,  connectivity  and  social 
indicators.  GDP  per  capita  in  the  capital 
region  well  exceeds  the  EU  average,  while 
some other counties have not yet reached half 

(10)  In 2021, social transfers (pensions included) reduced 
Gini coefficient by 15.8 p.p. in Lithuania, and by 22.1 
p.p. in the EU on average; At-risk-of poverty rate 
(AROPE) – by 22.5 p.p. in Lithuania, and by 28.5 p.p. in 
the EU on average. 

(11)  European Commission’s calculations based on the OECD 

income distribution database data, 
https://stats.oecd.org/Index.aspx?DataSetCode=IDD.  

5 

 
 
 
                                                 
Box 1:      Energy policy response in Lithuania 

Lithuania adopted  several support measures to cushion the impact of energy price inflation on 
households  and  businesses.  The  Commission’s  2023  spring  forecast  has  projected  that  their 
costs  in  2023  will  amount  to  0.7%  of  GDP.    Most  of  the  measures  do  not  preserve  the  price 
signal to increase energy efficiency or reduce energy consumption  and are not targeted on the 
most  vulnerable  people  and  businesses.  Temporary  support  measures  for  households  will  be 
applied until the end of 2023 (with  the exception of  the  VAT compensation  for district heating 
which  is  set  to  last  until  the  end  of  the  first  heating  season  in  2024),  while  businesses  will 
benefit from the electricity price caps until March 2023. 

The measures include electricity and gas price caps for households and an electricity  price cap 
for  businesses.  From  1  July  2022  to  31  December  2023,  households  receive  100% 
reimbursement  of  the  costs  of  electricity  and gas above  certain  price  thresholds  per  KWh  (the 
price cap thresholds for electricity are being gradually increased from 24 cents per KWh in the 
second half of 2022 to 33 cents in the second half of 2023). All households benefit from this 
compensation irrespective of their income levels. Similarly, 50% of the electricity price above  a 
certain  threshold  is  reimbursed  to  businesses  (the  same  thresholds  are  applied  as  for 
households,  but  without  VAT  or  excises  included  in  the  price).  These  compensation  measures 
applied  from  1  October  2022  to  31  March  2023.  However,  the  market  price  of  electricity  fell 
below  the  threshold  (28  cents  per  KWh)  in  the  first  months  of  2023,  negating  the  need  to 
compensate businesses.  

Lithuania applies the EU solidarity contribution under Council Regulation (EU) 2022/1854 in the 
fiscal year starting in 2023. The contribution at a rate of 33% applies to an amount exceeding 
120%  of  the  average  taxable  profits  in  2018-2021  in  the  crude  oil,  natural  gas,  coal,  and  oil 
refining sectors; as well as at a rate of 90% to the revenue of electricity producers that exceeds 
prescribed market rate caps which are set by the State Energy Regulatory Council. As Lithuania 
imports most of its electricity from other EU  countries (mostly from Sweden), according to the 
law,  the  Energy  Ministry,  the  National  Energy  Regulatory  Council  and  Litgrid,  the  power 
transmission  system  operator,  will  be  obliged  to  reach  a  revenue-sharing  agreement  with 
exporting countries. 

Following  its  decision  to  cease  fossil  fuels  imports  from  Russia,  Lithuania  has  successfully 
mobilised its infrastructure and has redirected its energy imports. The Klaipeda LNG terminal has 
ensured Lithuania's gas independence from Russia and has  helped the other Baltic countries to 
do  the  same.  In  2022,  Lithuania  also  completed  works  on  two  gas  interconnectors  with 
neighboring  Member  States:  the  Poland–Lithuania  Gas 
Interconnection,  which  became 
operational  in  May  2022, and  the  strengthening  of  the  Lithuania-Latvia  Interconnection,  which 
was completed in December 2022. On synchronisation with the EU electricity grid, the project is 
ongoing and is expected to be completed by the end of 2025, in cooperation with Poland, Latvia 
and Estonia.  

is 

gross 

domestic 
average. 
Lithuania’s 
expenditure  on  R&D 
low  but  slowly 
improving. Lithuania is also improving on SDG 
In 
indicators  on  macroeconomic  stability. 
recent  years,  the  country  has  increased  the 
amount of investment as a percentage of GDP, 
and improved the quality of its institutions and 
people’s trust in them (see Annex 1). 

to  reach  the  EU  average  for  participation  in 
early  childhood  education  and  adult  learning 
(see  Annex  14  and  15) (12).  The  proportion  of 
internet 
households 
connections  is  significantly  above  the  EU 

high-speed 

with 

(12)  The indicator on participation in adult learning during 
the previous four weeks is used in the country report, 
rather than the indicator on learning over the previous 
12 months. This is because adult education survey 
(AES) data for the 12-month indicator are currently only 
available for 2016 , while the new labour force survey 
(LFS) indicator, agreed for use in the social scoreboard 
and as the 2030 headline target on skills, will only be 
available in 2023. 

6 

 
                                                 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

to 

and 

general 
innovation 

Lithuania’s  recovery  and  resilience  plan 
(RRP) aims to address the key challenges 
the  green  and  digital 
related 
vocational 
transition, 
education, 
science, 
tax  compliance, 
healthcare  services, 
social  protection  and  employment. 
It 
consists of 27 reforms and 3 investments that 
are  supported  by  EUR  2.2  billion  in  grants, 
representing  4%  of  Lithuania’s  GDP  in  2021 
(see Annex 3 for more details).  

and 

of 

implementation 

Lithuania’s 
The 
recovery  and  resilience  plan 
is  well 
underway.  The  Commission  disbursed  EUR 
289  million  to  Lithuania  in  August  2021  as 
the  Recovery  and 
pre-financing  under 
Resilience  Facility  (RRF).  In  addition,  on  30 
November  2022,  Lithuania  submitted  a 
request  for  the  disbursement  of  EUR  649.5 
million, concerning the first instalment of non-
repayable  support.  The  Commission  has 
adopted a positive preliminary assessment for 
31  out  of  33  milestones  covering  six  of  the 
two 
plan’s 
milestones  related  to  tax  reforms  have  been 
assessed  to  be  not  satisfactorily  fulfilled.  The 
Commission  acknowledges  the  first  steps 
already  taken  by  Lithuania  to  fulfil  these 
outstanding  milestones,  though  significant 
work remains to be done. 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.  

components,  while 

seven 

and  innovation,  as  well  as  the  public  sector 
and  tax  compliance.  Due  to  its  cross-cutting 
relevance,  the  satisfactory  fulfilment  of  the 
milestone  on  the  RRP  repository  system 
provides for further successful implementation 
of the plan.  

Work  on  the  milestones  and  targets  for 
the forthcoming payment requests is well 
underway.  These  include  adoption  of  an 
action  plan  for  the  transition  to  a  circular 
economy,  and  key  legislation  on  emergency 
medical  services,  the  secondary  use  of  health 
data,  adult  education  and 
limiting  cash 
payments.  Progress  is  also  expected  on  the 
installation of new electricity storage facilities 
and the launch of building renovations. 

or 

war 

intends 

Lithuania 

However,  due  to  high 
inflation  and 
disruptions  in  supply  chains caused  by 
aggression 
the Russian 
of 
investments may 
against Ukraine, a few 
be delayed 
discontinued and could 
potentially  affect  the  submission  of  the 
subsequent  payment  requests.  On  this 
basis, 
submit 
modifications  to  the  plan.  The  amended  RRP, 
including the REPowerEU chapter, are expected 
to  address  the  challenges  related  to  energy 
supply  and  security,  energy  efficiency  as  well 
as  to  accelerate  the decarbonisation  of  the 
economy  and  reduce  dependence  on  fossil 
fuels.  Also,  Lithuania  aims  at  requesting 
to 
additional 
the 
to 
REPowerEU 
promote 
chapter 
investments  in  green  technologies  and  high 
value-added industries in the private sector. 

contribute 
to 
and 

loans, 

to 

The  31  milestones  that  have  been 
demonstrate 
fulfilled 
satisfactorily 
significant 
the 
progress 
implementation  of  Lithuania’s  recovery 
and  resilience  plan.  This  progress  includes 
the  launch  of  key  reforms  in  the  areas  of 
education,  green  and  digital  transition,  social 
protection  and  employment  support,  science 

in 

The  following,  more  detailed 
review  of 
measures being implemented under the RRP in 
no way implies formal Commission approval or 
rejection of any payment requests.  

7 

 
 
Supporting the green and digital 
transition 

for 

to  promote 

frameworks 

On  the  green  transition,  Lithuania  has 
including 
completed  several  measures 
new 
the  sale  of 
electricity  and  a  procedure  to  determine 
the  energy  efficiency  and  environmental 
requirements  of  road  transport  vehicles. 
Lithuania  has  adopted  a  new 
legislative 
framework  to  improve  institutional  and  legal 
mechanisms 
the  generation, 
transmission  and  consumption  of  electricity 
from  renewable  sources.  This  measure  will 
improve  the  Lithuanian  energy  market  by 
establishing  a  new  framework  for  the  sale  of 
electricity  and  setting  long-term  renewable 
energy  targets  for  all  sectors.  This  will 
contribute  to  the  development  of  renewable 
energy  sources 
in  Lithuania.  As  regards 
transport,  Lithuania  has  adopted  a  new 
legislative framework establishing a procedure 
for  determining  energy  efficiency  and 
environmental protection requirements for the 
purchase  of  road  transport  vehicles,  which 
to 
would 
transport. 
decarbonisation 
Furthermore, 
and 
operationalisation  of  the  Sustainable  Mobility 
Fund, alongside the adoption of an action plan 
for  a  better  network  of  electric  vehicle 
recharging  points  and  an  IT  system  to  record 
the  quantities  of  renewable  fuels  in  the 
transport sector, will help to make greener the 
transport sector in Lithuania. 

establishment 

progressively 

contribute 

road 

the 

of 

transition 

Reforms  and  investments  that  support 
include  several 
the  digital 
measures  to  achieve  greater  digitalisation  of 
the  public  administration  and  businesses, 
develop  basic  and  advanced  digital  skills,  and 
improve  broadband  infrastructure.  Therefore, 
to  increase  the  level  of  digitalisation  of  the 
public  sector,  Lithuania  has  set  up  a 
competence  centre  for  open  data  and  digital 
transformation,  with 
to  avoid 
duplication  of  existing  solutions.  Each  new 
proposed  solution  will  also  be  assessed  to 
is  compatible  with  the  overall 
ensure 
architecture  of  the  information  systems  and 
is  making 
data.  Furthermore,  Lithuania 

the  aim 

it 

8 

land  transport  corridors 

progress  in  improving  digital  connectivity  in 
international 
(Via 
Baltica and Rail Baltica) and other trunk roads 
and  railway  lines  of  national  significance, 
airports  and  seaports.  This  entails  assigning 
the  radio  frequencies  for  the  deployment  of 
5G  networks  and  the  adoption  of 
laws 
enabling  faster  installation  of  the  electronic 
Finally, 
communications 
additional  measures  have  been  introduced  to 
promote the development of digital skills at all 
levels  of  society,  including  pupils,  employees, 
jobseekers,  vulnerable  groups,  and  older 
people.  

infrastructure. 

Fostering science and innovation 

Measures  in  the  field  of  science  and 
innovation  aim  to  support  innovative 
activities, concentrate resources in areas 
of  high  growth  potential,  and  promote 
in  research  and 
active  participation 
innovation (R&I). Lithuania has established a 
single  Innovation  Agency, which  will  provide  a 
one-stop  shop  for  businesses  seeking  advice 
and  support  on  their  innovative  activities. 
Revised  legal  acts  will  make  the  innovation 
support framework more coherent and reduce 
in  existing  support 
gaps  and  overlaps 
measures. A new smart specialisation strategy 
will enable Lithuania to concentrate resources 
in  the  areas  of  highest  growth  potential. 
Finally, an agency to implement science policy 
has  been  established  to  promote  more  active 
participation  of  Lithuanian  applicants 
in 
international R&I programmes.   

Quality and accessible education 
over a lifetime 

Lithuania  has  adopted  several  measures 
to  improve  the  quality  and  efficiency  of 
general  and  vocational  education.    The 
new  legislation  on  the  Millennium  School 
Progress  Programme  sets  the  framework  for 
future  investments  to  create  a  high-quality 
education 
different 
municipalities  and  to  fill  the  gaps  in  pupils’ 

system 

across 

 
 
learning 

environment. 

learning.  The  new  framework  to  develop  a 
network  of  schools  that  implement  education 
programmes  will 
improve  the  quality  of 
education and help address inequalities. It will 
do  this  by  reducing  the  number  of  small 
schools, consolidating the school network, and 
providing  all  students  and  teachers  with  a 
better 
The  new 
legislative  frameworks  on  career  guidance, 
which includes provisions on career specialists 
who  have  started  working  in  schools  and  in 
regional  career  centers,  and  the  support 
scheme  for  apprenticeships  will  help  address 
skills 
The 
shortages  and  mismatches. 
implementation  of  the  vocational  education 
and 
training  strengthening  program  will 
contribute to consolidating resources, avoiding 
duplication  of  programs  and  ensure  the 
involvement  of  key  stakeholders 
the 
development of these programs. 

in 

Improving social protection and 
employment support 

in 

the  areas  of 

Lithuania  already  completed  two  sub-
social 
measures 
protection.  Lithuania  has  set-up  an 
accreditation scheme for the provision of 
social  care  to  increase  the  quality  of 
social  care  services.  Furthermore,  an 
additional  benefit  for  disabled  and  elderly 
single  persons  has  been  introduced  to  tackle 
poverty in these vulnerable groups. Significant 
legislative  steps  have  been  completed  on 
optimising 
operational 
processes  in  the  Employment  Service,  and  to 
training  and  employment  support 
launch 
schemes. Two pilot schemes have been set up: 
a  pilot  scheme  dedicated  to  entrepreneurship 
to support job creation in the areas of the twin 
transition  and  circular  economy,  and  a  pilot 
scheme  to  help  people  to  get  qualifications 
and/or acquire skills for high value-added jobs 
(including digital skills).  

improving 

and 

Increasing the effectiveness of the 
public sector and tax compliance  

social 

taxation 

The  RRP  sets  out  measures  to  create  a 
fairer  and  more  growth-friendly  tax 
system,  aiming  at  reducing  poverty  and 
income  inequality,  as  well  as  improving 
its  tax  administration  and  low  levels  of 
tax  compliance.  To  this  end,  a  study 
assessing 
the  effectiveness  of  personal 
insurance 
and 
income 
contributions  in  reducing  poverty  and  income 
inequality  has  been  delivered.  In  addition,  the 
RRP is expected to contribute when creating a 
sustainable  revenue  base  and  increase  the 
redistributive  capacity  of  the  tax  and  benefit 
system,  by  re-orienting  the  system  towards 
more  growth-friendly  and  green  taxation,  and 
by  abolishing  inefficient  tax  exemptions.  The 
pending  reform,  while  slightly  delayed,  should 
address 
tax 
treatment of different income sources, reduce 
incentives  for  tax  arbitrage  and  make  the 
system  simpler,  more  transparent,  and  fairer. 
In  addition,  the  RRP  includes  measures  to 
strengthen the tax administration by improving 
data analytics, developing IT tools,  developing 
employees’ 
cash 
transactions  to  shrink  the  shadow  economy. 
Lithuania recently prohibited cash payments of 
over EUR 5 000, and has also reformed its tax 
administration, including through digitalisation 
projects.  

differentiated 

limiting 

highly 

skills, 

and 

the 

on 

rules 

adopted 

To  increase  the  long-term  sustainability 
of  the  state  and  municipal  budgets, 
the 
Lithuania 
preparation  and 
implementation  of 
public-private partnerships. The rules allow 
municipal  investment  projects  to  be  grouped 
to 
together  and 
participate 
partnership 
in 
programmes  organised  by  the  state,  reducing 
the  administrative  cost  of  public  agreements 
with private partners. 

enable  municipalities 
public-private 

9 

 
Box 1:  KEY  DELIVERABLES  EXPECTED  UNDER  THE  RECOVERY  AND  RESILIENCE  PLAN  IN 

2023-2024: 

  Entry into force of legislation on improving the working conditions and professional 

qualifications of health professionals 

  Entry  into  force  of  a  basic  model  for  the  delivery  of  public  health  services,  of 
legislation  on  the  establishment  and  regulation  of  a  network  of  personal  health 
care  institutions  and  legislation  governing  the  implementation  of  the  long-term 
care model 

  Establishment of a Health Professionals Competence Platform 

  Modernisation  of  health  care  facilities  in  hospitals’  emergency,  resuscitation  and 

intensive care units 

  An action plan for the transition to the circular economy 

  Award of contracts for the digitisation of cultural resources 

  A one-stop shop information system for lifelong learning 

  IT qualifications for teachers 

  Reforming the system for funding and enrolment in higher education 

  Reforming the methodology to determine municipal budget revenue  

  Implementation of tax reforms, including reviewing personal income taxation and 
social  insurance  contributions,  abolishing  inefficient  tax  exemptions,  and  re-
orienting the system towards more growth-friendly and green taxation 

  A  framework  for  the  development  of  strategic  skills  in  the  public  sector  and 

delivery of the related training modules  

  Entry into operation of digital tools to allow real-time registration of working time 

in the construction sector  

  Increasing the coverage of the unemployment insurance system  

  Reforming minimum income protection 

  Entry  into  operation  of  a  new  multifunctional  IT  tool  (employment  platform) 
interoperable with a life-long learning system, a career guidance system and other 
national information systems. 

10 

 
 
 
FURTHER PRIORITIES AHEAD 

in 

those 

finances  and  public  services; 

Beyond 
the  RRP, 
tackled 
Lithuania  faces  additional  challenges. 
These  include:  (i)  improving  the  quality  of 
public 
(ii) 
decarbonising industrial production and energy 
generation as well as the transport sector; (iii) 
addressing  social 
inclusion  and  protection 
issues; 
strengthening  primary  and 
preventive  care;  and  (v)  closing  skill  gaps. 
Addressing  these  challenges  will  also  help 
Lithuania 
in 
achieving  the  SDGs  where  it  currently  shows 
room  for  improvement,  namely  Good  health 
and  well-being  (SDG3),  Affordable  and  clean 
energy (SDG 7) and Quality education (SDG 4) 
(see Annex 1). 

further  progress 

to  make 

(iv) 

Improving the adequacy and 
composition of government 
revenue  

Even  though  Lithuania’s  revenues  from 
taxes  and  social  security  contributions 
steadily  increased  in  2017-2022,  they 
remain  among  the  lowest  in  the  EU.  In 
2021,  revenue  from  tax  and  social  security 
contributions amounted to 32.3% of GDP, well 
below the EU average of 41.2%. The VAT gap 
(the difference between expected VAT revenue 
and  the  amount  actually  collected)  is  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  (see  Annex  19).  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 (see Annex 19). 

Low  budget  revenues  limit  the  funding 
available    for  public  services  and  social 
transfers,  hampering  timely  and  equal 
access  to  healthcare,  social  protection 
and  general  public  services.  The  public 
services  which  receive  the  lowest  level  of 
public funding in comparison to other Member 
States  are  healthcare  and  general  public 
(such  as  public  administration, 
services 
legislative  or  diplomatic  services,  among 
others).  Inadequate  financial  resources  for 
healthcare result in long waiting times for care 
and  high  levels  of  unmet  needs  for  medical 
care, high out-of-pocket costs for households, 
and  the  inability  to  offer  competitive  salaries 
to  healthcare  professionals.  General  public 
services  are  also  structurally  underfunded  in 
Lithuania,  receiving  almost  half  the  funding 
(as a percentage of GDP) than the EU average. 
In this context, the government is struggling to 
attract  talents  to  work  for  the  civil  service. 
Public  spending  on  social protection increased 
in 2015-2021, but it is still significantly below 
the  EU  average.  This  translates  into  relatively 
low  levels  and  coverage  of  social  benefits, 
with old-age pensions among the lowest in the 
EU relative to employment incomes (see Annex 
14).  As  a  result,  social  transfers  in  Lithuania 
are  less  effective  at  reducing  poverty  and 
inequality than in other EU countries (13).  

in 

general 

government 
Increases 
expenditure,  which  are  not  matched  by 
corresponding  financing  measures,  might 
put  pressure  on  fiscal  sustainability  in 
the longer term. In its national progress plan 
for  2021-2030  Lithuania  has  committed  to 
reach  a  national  consensus  between  social 
partners,  civil  society  and  political  parties  on 
the  scope  of  services  that  the  general 
government must provide, and on the level of 

(13)  In 2021, social transfers (pensions included) reduced 
Gini coefficient by 15.8 p.p. in Lithuania, and by 22.1 
p.p. in the EU on average; AROP – by 22.5 p.p. in 
Lithuania, and by 28.5 p.p. in the EU on average. 

11 

 
 
                                                 
financial 

resources  needed 

to 
adequate 
provide  these  services.  According  to  the 
national  progress plan, the government would 
set  a  target  for  the  level  of  revenues  from 
taxes  and  social  security  contributions  to  be 
achieved  by  2030,  based  on  this  agreement. 
No progress has yet been made in this respect, 
even  though  the  government  has  introduced 
expenditure 
several  major 
measures in 2021-2023 (such as increases in 
public sector wages, pensions and other social 
benefits),  which 
by 
are 
corresponding revenue measures (14). Lithuania 
faces  a  challenge    to  satisfy  the  increasing 
demand for quality public services and to offer 
competitive  salaries  to  attract  talent  into  the 
public sector. Matching permanent expenditure  
by financing measures would help achieve this 
in a sustainable manner. 

permanent 

offset 

not 

The  country  still  faces  some  challenges 
related to the public procurement market 
and its lack of competition. The percentage 
of single bids has increased significantly in the 
past  two  years  (Annex  12).  Although  some 
changes  have  been 
implemented,  further 
improving the system could help reduce costs 
and  increase  the  quality  of  the  services 
provided. 

Tackling energy and environmental 
challenges  

Russia’s 

Following 

Although Lithuania is increasing domestic 
energy generation, it still imports around 
two-thirds  of  its  electricity  needs  from 
unjustified 
abroad. 
invasion of Ukraine, Lithuania has successfully 
abandoned  imports  of  gas,  oil,  electricity  and 
coal  from  Russia.  It  has  also  reduced  its  gas 
consumption by 47.9% (between August 2022 
and  January  2023),  which  is  the  second 
biggest  reduction  in  the  EU (15).  However, 
remains  highly  dependent  on 
Lithuania 

(14)  European Commission opinion on the 2023 Draft 
Budgetary Plan of Lithuania, 22 November 2022. 

(15)  The significant fall in gas demand was driven by the 

reduction in gas consumption by Lithuania’s largest gas 
consumer, Achema, a fertiliser producer. 

12 

gas 

fuels,  with 

still 
fossil 
imported 
its  electricity 
representing  a  quarter  of 
generation.  While 
have 
prices 
energy 
decreased, uncertainty remains regarding next 
winter,  which  requires  continued  efforts  to 
structurally  reduce  gas  demand.  Reducing 
further  the  reliance  on  fossil  fuels  is  an 
essential  part  of  ensuring  security  of  supply. 
Nevertheless,  Lithuania  has  taken  steps  to 
streamline permitting procedures and promote 
electricity  generation  from  renewable  energy 
sources. There has been a big increase in solar 
(by  55%)  and  wind  (by  24%)  production 
capacity  in  2001-2021  (see  Annex  7).  In  the 
long term, the increase in generation capacity 
from  renewable  sources  will  have  to  be  met 
with enough grid capacity to anticipate market 
saturations and market access guarantees for 
those  who  both  produce  and  consume  energy 
and renewable energy communities (16). 

is 

to 

the 

Lithuania’s  electricity  grid 
still 
synchronised  with  the  BRELL  electricity 
network.  As  the  BRELL  grid  is  controlled  by 
Russia,  Lithuania’s  electricity  grid  remains 
exposed 
risk  of  being  suddenly 
disconnected.  The  regional  synchronisation  of 
the  electricity  grid  with  the  rest  of  the 
European  Union 
is  making  progress  but 
remains to  be  completed. The  region’s  energy 
security can also be improved by ensuring that 
energy interconnections have enough capacity. 
To  that  end,  cooperation  with  Latvia  and 
Estonia is necessary. 

The  transport  sector  remains  the  largest 
emitter  of  greenhouse  gas  emissions  in 
Lithuania  (see  Annex  6).  The  share  of  public 
transport as a percentage of overall passenger 
travel  is  the  lowest  in  the  EU  (5.9%  in  2020 
and  9.4%  in  2019),  while  the  percentage  of 
zero emission vehicles is less than half the EU 
average  (4.9%  vs  10.7%  in  2022).  The  public 
transport  system  in  Lithuania  is  hindered  by 
fragmented  local,  intercity  and  rail  systems, 
which 
level. 
lack  coordination  at  central 
Additionally, 32% of Lithuania’s population live 
in  regions  exposed  to  critical  levels  of  air 
pollution,  leading  to  significant  health  issues. 

(16)  Energy communities organise collective and citizen-
driven energy actions that help pave the way for a 
clean energy transition, while moving citizens to the 
fore. 

 
                                                 
                                                 
Lithuania has significant scope to increase the 
green  transition  of  its  transport  sector  with  a 
strong  emphasis  on  the  use  of  rail  transport, 
of  which  only  8%  is  electrified  (vs  56.6%  in 
the  EU27).  It  also  needs  a  well-integrated 
multimodal public transport system, which is a 
factor  in  the  urban-rural  divide  due  to  less 
available  transport  outside  urban  areas  (see 
Annex  8).  The  incentives  to  choose  less-
polluting  vehicles  could  be  strengthened  with 
an annual car tax, priced according to the car’s 
emissions.  Currently,  Lithuania  is  one  of  the 
few  EU  countries  without  such  a  tax  (see  the 
Section on public finances). Reforms to create 
low  emission  zones  in  cities  have  stalled  due 
to  municipalities’  lack  of  preparation  and  the 
absence of coordination at a central level. 

for 

potential 

Lithuania is among the worst performers 
in the EU on energy poverty, with a large 
building 
untapped 
renovation.  With  22.5%  of  the  population 
unable  to  keep  their  homes  warm  enough  in 
2021  (vs  31.1%  in  2015),  Lithuania’s  rate  is 
considerably higher than the EU average (from 
9.6%  in  2015  to  6.9%  in  2021),  and  these 
data do not yet show the effects of the energy 
price  surge  of  2022  (see  Annex  8).  Lithuania 
can  further  reduce  energy  consumption  by 
speeding up the renovation of buildings, but a 
credible  strategy  to  reach  the  goal  of  1000 
renovated  buildings  per  year  is  missing.  The 
current renovation scheme entails lengthy and 
complex  procedures. 
In  addition,  building 
managers  do  not  have  incentives  to  renovate 
and  the  current  voting  scheme  encourages 
homeowners  not  to  renovate (17).  Additionally, 
in 2021, 57% of all households (44% by area) 
in  Lithuania  were  using  district  heating 
Increased 
systems  to  heat  their  homes. 
building  renovations,  together  with  further 
modernisation of the district  heating systems, 
will  play  a  major  role  in  reducing  energy 
poverty in Lithuania. 

sector 

and 
Lithuania’s 
industrial 
resource-  and 
workforce  are  more 
energy-intensive  than  the  EU  average. 
The 
is 
considerably  less  efficient  at  using  materials 

particularly 

economy, 

industry, 

to  produce  wealth  than  the  EU  average,  with 
resource  productivity  almost  half  of  the  EU 
intensity  of  the  Lithuanian 
average.  The 
workforce’s  greenhouse  gas  emissions 
is 
above the EU average (see Annexes 8 and 9). 
Additionally,  a  large  share  of  the  industrial 
sector  is  dependent  on  natural  gas  for  non-
energy  uses.  Fossil  fuel  dependency  could  be 
reduced by shifting to biogases. 

that 

include 

in  key  sectors 

In  the  context  of  the  green  transition, 
labour  shortages 
in 
Lithuania have increased in recent years, 
which is linked to a lack of relevant skills 
and creating bottlenecks in the transition 
to  a  net-zero  economy.  In  2022,  labour 
shortages  were  reported  in  28  occupations  in 
Lithuania 
require  specific  skills  or 
knowledge  for  the  green  transition.  The 
insulation  workers, 
occupations 
plumbers  and  pipe  fitters,  and  construction 
and  other  types  of  electricians (18).  The  job 
vacancy  rate  increased  in  most  key  sectors, 
such  as  construction  (from  0.8%  in  2015  to 
1.5% in 2021) and manufacturing (from 1.4% 
in  2015  to  1.8%  in  2021),  with  both  sectors 
below  the  EU  average  of  3.6%  and  1.9%, 
respectively,  in  2021 (19).  In  2022,  labour 
shortages  were 
factor 
constraining production in industry (for 25.8% 
of  firms)  and  construction  (for  31.4%  of 
firms) (20).  Upskilling  and  reskilling  for  the 
green transition, including for the people most 
affected,  and  promoting 
labour 
markets,  are  essential  policies  to  accelerate 
the  transition  to  net-zero  and  ensure  its 
fairness (see Annex 8).   

reported  as  a 

inclusive 

(18)  Data on shortages is based on European Labour 

Authority (2023), EURES Report on labour shortages 
and surpluses 2022. National authorities report through 
a questionnaire, based on administrative data and other 
sources as submitted by the EURES National 
Coordination Offices (definitions of shortages differ, 
thus data is not comparable across countries and 
covers a wide variety of sectors). Skills and knowledge 
requirements are based on the ESCO (European Skills 
Competences and Occupations) taxonomy on skills for 
the green transition (for occupations at ISCO 4-digit 
level of which there are 436 in total). Examples are 
identified based on their ESCO “greenness” score and 
relevant sectors. 

(17)  In the current setting, passive homeowners are by 
default counted as voting against the renovation. 

(19)  Eurostat (JVS_A_RATE_R2) 

(20)  European Business and Consumer Survey 

13 

 
                                                 
                                                 
Social inclusion and protection 

While  social  indicators  in  Lithuania  have 
improved  somewhat,  the  energy  crisis 
and  soaring  inflation  may  reverse  the 
positive trend.   The overall share of people 
at  risk  of  poverty  or  social  exclusion  fell 
slightly  between  2020  and  2021.    However, 
compared  to  the  overall  rate  of  23.5%  (in 
2021)  significantly  higher  rates  have  been 
observed  for  people  over  65  (38.7%)  and  for 
persons  with  disabilities  (38.9%).  The  rate  of 
older women (65+) at risk of poverty or social 
exclusion  was  almost  twice  as  high  as  for 
older  men.  In  addition,  compared  to  2019-
2020 the situation has deteriorated for single 
parents with dependent children. Furthermore, 
22.5%  of  the  population  were  unable  to  heat 
their  homes  adequately  in  2021.  This  was 
three  times  higher  than  the  EU  average.  This 
figure rises to 30.9% for those already at risk 
of poverty. These statistics are expected to be 
further negatively impacted by the high energy 
prices  and  inflationary  pressures  observed 
since  2022.  Positive  developments  have  been 
observed  in  youth  unemployment  and  long-
term  unemployment,  which  both  recorded 
significant  falls  in  2022,  compared  to  the 
2020-2021 levels.  

in 

the 

Despite  the  strong  rebound 
in  the 
employment  rates,  there  are  still  some 
structural  problems 
labour 
market. Investment  in  policies  to  help  people 
find  work  (active  labour  market  policies)  is 
relatively  low  in  Lithuania  with  some  recent 
pilot  measures  expanding  the  provision  of 
improving 
vocational  training  and  training 
qualifications.  Lithuania  depends  strongly  on 
EU  Structural  Funds 
these 
measures,  while  the  integration  of  social 
assistance  and  vocational  training  into  active 
for 
labour  market 
policies, 
unemployed 
still 
people, 
ineffective. Collective bargaining coverage and 
the  number  of  people  in  trade  unions  in 
Lithuania  remain  very  low,  making  it  difficult 
for 
in 
the  social  partners 
constructive social dialogue. 

especially 
is 

to  engage 

finance 

to 

industrial  transition 
Accelerating  the 
towards investment in manufacturing for 
clean  technology  is  crucial  to  improve 
industrial  competitiveness  and  security. 
Lithuania  has  the  potential  to  transform  its 
manufacturing sector and to contribute to the 
clean  technology  supply  chain.  According  to 
OECD figures, in 2021 about 4% of Lithuanian 
start-ups  are  in  the  ’green’  sector  (the  OECD 
average  in  2021  was  3%).  Total  venture 
capital  investment  amounted  to  0.73%  of 
GDP,  of  which  5.3%  was  directed  to  climate 
supports 
tech 
investments  in  the  energy  sector  (energy 
generation and grid technologies), as well as in 
transport.  

This  mainly 

start-ups. 

a 

The 

from 

yearly 

economy 

Two-thirds  of  the  EU-protected  habitats 
in  Lithuania  are  classified  as being  in  an 
unfavourable  condition,  while  progress 
towards 
is 
circular 
insufficient. 
environmental 
investment gap (21), which excludes investment 
to  achieve  carbon  neutrality,  is  estimated  to 
have  reached  EUR  0.9  billion  (see  Annex  6) 
over  2014-2020.  Most  of  those  investment 
needs are in biodiversity and ecosystems (EUR 
651  million  per  year),  which  are  under 
pressure 
forestry,  agriculture  and 
invasive  species.  At  the  same  time,  while  still 
above  the  2030  target,  net  carbon  removals 
by  land  use,  land  use  change  and  forestry 
(LULUCF) have fallen significantly since 2013, 
due  to  pressure  from  forestry  and  more 
intensive  land  use.  The  agricultural  sector 
largest  emitter  of 
remains 
greenhouse gases in Lithuania, with  emissions 
on a generally upward trend since the turn of 
the  century.  This  calls  for  a  more  action  by 
stakeholders to  help  achieve  the  national  and 
EU  climate  targets.  Similarly,  Lithuania’s  use 
of  circular  materials  has  fallen  since  2016  to 
almost a third of the EU average in 2021 (4% 
vs.  11.7%  in  the  EU-27)  (see  Annex  9), 
emphasising  the  need  for  more  investment in 
a  circular  model.  Lithuania  also  missed  the 
2020  EU  target  for  municipal  waste  recycling 
of  50%,  with  44.2%  in  2021,  and  there  is  a 
risk of it not meeting the EU target for 2025.  

the  second 

(21)  the difference between current environment and 

climate expenditure and the expenditure required to 
reach various environmental and climate objectives. 

14 

 
                                                 
The  inadequacy  of  the  social  safety  net 
remains  a  problem,  as  reflected  by  the 
indicators  under  the  European  Pillar  of  Social 
Rights. The level of the minimum income was 
only  50%  of  the  amount  used  to  define 
poverty and 33% of the income of a low-wage 
earner in 2021 (22). Just 9.6% of people below 
the  threshold  that  defines  them  at  risk  of 
poverty  received  social  assistance  benefits  in 
2020.  To  address  this,  Lithuania  introduced  a 
reform  to  pro-actively 
identify  vulnerable 
people  in  need  of  social  assistance  (see  also 
Annex  14).  While  this  is  expected  to  improve 
the  situation  somewhat,  further  efforts  are 
needed 
and 
fragmentation  in  the  planning,  organisation 
and  delivery  of  social  services.  In  particular, 
municipalities  do  not  sufficiently  involve  non-
governmental  organisations 
in  the  annual 
planning of social services. Lithuania launched 
a  pilot  project  in  certain  municipalities  that 
aimed  to  improve  the  provision  of  integrated 
services  for  the  unemployed.  It  has  proved  to 
be  successful  in  addressing  some  of  the 
related  challenges.  Therefore,  as  of  2023,  all 
municipalities in the country are recommended 
to apply the methodology of these projects in 
their programmes to promote employment. 

inefficiencies 

address 

to 

Lithuania  has  made  some  reforms  in 
social  housing.  In  particular,  changes  to 
legislation,  applicable  since  2022,  introduced 
the  right  to  prioritise  single  parent  families, 
increased  the  income  and  assets  limits  taken 
into  account  in  assessing  eligibility  for  social 
housing and created special provisions in case 
of  a  national  emergency  or  quarantine. 
Nevertheless, access to social housing remains 
limited. At the end of 2022, there were around 
9 700 families (almost 19 000 people) waiting 
for  social  housing,  with  an  average  waiting 
time  of  5.85  years.    While  investments  are 
planned  under  the  2021-2027  EU  cohesion 
policy funds, in particular to develop the social 
housing  stock  for  disabled  persons  and  large 
families,  these  would  not  be  enough  to 
address  all  needs.  In  this  context,  it  remains 
crucial  to  develop  an  overall  strategy  on  how 
to  tackle  chronic  shortages  and  increase  the 
quality of social housing.  

(22)  Vs: 59% and 47%, respectively in the EU. 

15 

Strengthening primary and 
preventive care 

faces 

several 

Lithuania 
challenges 
related to its health system, in particular 
primary  care  and  disease  prevention. 
Compared  with  other  Member  States, 
Lithuania  has  a  high  number  of  avoidable 
hospital  admissions  and  one  of  the  highest 
measures  of 
treatable  and  preventable 
mortality. Life expectancy remains among the 
lowest  in  the  EU,  having  dropped  further 
between  2020  and  2021.  Lithuania  has  the 
highest  rate  of  mortality  from  suicide  in  the 
EU.  The  share  of  out-of-pocket  spending  on 
healthcare  is  almost  double  the  EU  average. 
Most  challenges  in  Lithuania’s  health  system 
are  linked  to  structural  underfunding  of  the 
health sector (health expenditure is among the 
lowest in the EU) and insufficient resources at 
primary care level and in public health offices.   

The  challenges  are  exacerbated  by 
shortages  and  an  uneven  distribution  of 
health  professionals,  which  limit  access 
to primary  healthcare. Shortages  of  nurses 
remain  a  particularly  persistent  issue.  While 
the  number  of  doctors  continues  to  grow,  the 
number  of  nurses  has  not  kept  pace  and 
The 
remains  below 
geographical  spread  of  doctors  presents  a 
challenge,  as  the  highest  concentration  of 
doctors is in the two biggest cities, accounting 
for  more  than  twice  the  ratio  in  the  rest  of 
Lithuania.  Persistent  Shortages  and  skills 
mismatches  across  all  health  professions 
hampers the provision of healthcare.  

the  EU  average. 

Lithuania  is  making  efforts  to  transform 
its  hospital  network,  moving  away  from 
hospital  care  to  a  model  based  on 
stronger primary care. The high reliance on 
inpatient  care,  with  very  high 
levels  of 
avoidable  hospital  admissions  and  varying 
quality  of  care,  hints  at  the  underdeveloped 
role  of  primary  care.  While  results  remain  to 
be confirmed, these efforts have the potential 
to increase the efficiency and resilience of the 
health  system.  At  the  same  time,  disease 
prevention  remains  a  challenge  in  Lithuania. 
COVID-19 caused major disruptions to disease 

 
                                                 
state-of-the-art  knowledge.  The  number  of 
doctorate  graduates  and  the  share  of  foreign 
doctorate  students  is  low.  The  availability  of 
information  and  communication  technology 
remains  a 
specialists,  while 
challenge for Lithuania’s the digital transition. 

improving, 

in 

non-R&D 

innovation 

Lithuania  has  not  fully  realised  the 
research, 
investing 
potential  of 
development and innovation. Lithuania is a 
moderate  innovator,  but  it  is  closing  the  gap 
with the rest of the EU, according to the 2022 
edition of the European Innovation Scoreboard. 
This  is  thanks  to  increases  in  venture  capital 
and 
expenditure. 
Lithuania’s  private  investment  in  R&D  is  just 
over  a  third  of  the  EU  average,  which  slows 
down  its  transition  to  a  higher  value-added 
economy  (see  also  Annex  12).  Most  of  the 
expenditure 
in  R&D  comes  from  public 
funding,  however,  R&D  intensity  remains  well 
below the government target  of 1.5% of GDP 
for 2024. Lithuania currently does not have a 
credible plan for ensuring the sustainability of 
more  investment  in  research  and  innovation 
beyond  the  RRP.  Human  resources  are  still 
lacking.  

Other  challenges  concern  the  weak  links 
between  science  and  business  and  the 
small  number  of  patents,  even  if  Lithuania 
introduced  measures  to  strengthen  public-
private  links.  This  is  demonstrated  by  the 
limited  productivity 
increases  gained  by 
applying  innovative  solutions.  At  the  same 
is  quite 
time, 
advanced. 

the  start-up  ecosystem 

prevention  programmes,  in  particular  those 
tackling cardiovascular diseases and treatable 
cancers.  There  is  scope  for  improvement  in 
cancer care, both in better screening coverage 
and  higher  survival  rates  for  many  treatable 
cancers  (cancer  mortality  is  above  the  EU 
average).  The  highest  rate  of  mortality  from 
suicide  in  the  EU  also  suggests  the  potential 
for  preventive  measures  to  foster  better 
mental wellbeing.  

Boosting productivity through 
education and innovation 

including 

teacher  shortages, 

Steps  are  being  taken  to  improve  the 
teacher 
quality  of  education,  but 
shortages  and  disparities 
in  pupils’ 
achievements  on  the  basis  of  their 
background  remain  a  challenge.  While 
Lithuania  has  recently  taken  some  steps  to 
to 
address 
improve the competences of pedagogical staff 
via  the  national  qualification  improvement 
programs,  teaching  is  not  a  very  attractive 
lacks  career  development 
profession,  and 
opportunities  for  teachers.  At  the  same  time, 
student  performance  is  closely  related  to 
socio-economic  background,  where  the  school 
system  cannot  compensate  for  the  socio-
economic  disparities  between  schools  and 
between  municipalities).  Furthermore,  21.4% 
of children aged under 3 in formal childcare is 
well  below  the  2021  EU  average  of  36.2%, 
with  potential  negative 
the 
educational  and  labour  market  outcomes  in 
the  longer  term.  In  order  to  increase  the 
participation,  all  children  from  2  years  of  age 
will  have  to  attend  pre-primary  education 
institutions as from 2025. 

impact  on 

Attainment  in  tertiary  education  is  very 
high,  but  the  labour  market  relevance  of 
higher  education  remains 
low.  While 
stricter  student  admission  criteria  will  enter 
into  force  in  2024,  a  number  of  higher 
education institutions still rely heavily on low-
achieving  students  who  pay  for  their  studies. 
Low  research  productivity  and  a  lack  of 
scientific  excellence  prevent  higher  education 
institutions  from  providing  students  with 

16 

 
KEY FINDINGS 

Lithuania’s  recovery  and  resilience  plan 
includes measures to address a series of 
structural challenges through: 

  improving 

and 

institutional 

legal 
mechanisms  to  promote  the  generation  of 
electricity  from  renewable  sources;  the 
establishment and operationalisation of the 
Sustainable  Mobility  Fund,  and  adoption  of 
an  action  plan  for  a  network  of  electric 
vehicle recharging points; 

  establishing  a  competence  centre  for  open 
data and digital transformation; supporting 
the  development  of  basic  and  advanced 
digital 
broadband 
infrastructure,  including  digital  connectivity 
in international land transport corridors;  

improving 

skills, 

  establishing  a  single  Innovation  Agency,  a 
one-stop  shop  for  businesses  seeking 
advice  and  support  for  their  innovative 
activities,  adoption  of  a  new  smart 
specialisation strategy; 

  rolling  out  the  Millennium  School  Progress 
Programme 
to  create  a  high-quality 
education system across municipalities and 
to bridge the gaps in pupils’ achievement;  

  Setting up an accreditation scheme for the 
provision  of  social  care,  reviewing  the 
benefits  system  for  single  persons  with  a 
disability  and  older 
single  persons, 
launching training and employment support 
schemes; 

  Reviewing  inefficient  tax  exemptions  and 
special tax regimes, and further broadening 
of  the  tax  base  to  sources  that  do  not 
hamper economic growth. 

should 

Lithuania 
steady 
implementation  of  its  recovery  and  resilience 
plan  and  swiftly  finalise  the  REPowerEU 

continue 

the 

chapter  with  a  view  to  rapidly  starting  its 
implementation. 

Beyond  the  reforms  and  investments  in 
the RRP, Lithuania would benefit from: 

  providing 

adequate 

for 
healthcare,  social  protection  and  general 
public services;  

financing 

  strengthening  primary  care  and  expanding 
preventive  care,  including  to  making  the 
healthcare system more resilient;  

  improving  the  planning  and  delivery  of 
social  services,  and  improving  access  to 
and the quality of social housing; 

  improving 

the  coordination  of  public 
transport  at  central  level  and  increasing 
incentives  to  choose  less-polluting  means 
of  transport;  stepping  up  energy  efficiency 
measures,  particularly 
industrial 
in  the 
sector, and residential buildings;  

  ensuring adequate grid capacity and access 
to  the  grid  for  electricity  generation  from 
renewable 
timely 
synchronisation with the EU electricity grid;  

ensuring 

sources; 

  stronger  protection  for  biodiversity  and 
towards  a  circular  economy, 

progress 
particularly in industry; 

  tackling  teacher  shortages,  increasing  the 
number  of  children 
in  early  childhood 
the 
care; 
education  and 
increasing 
relevance of higher education to the needs 
of  employers,  and  promoting  the  skills 
needed for the green transition;  

and 

  providing sustainable sources of public R&D 
research 
funding 
R&D 
resources, 
investment  and  improving  national  policies 
to attract and retain talent. 

consolidating 

promoting 

private 

17 

 
 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

A22.  Macroeconomic imbalance procedure assessment matrix 

21 

24 

24 

26 

29 

31 

34 

35 

35 

40 

44 

47 

47 

50 

52 

54 

57 

59 

59 

62 

65 

68 

70 

70 

72 

74 

75 

78 

 
 
 
LIST OF TABLES 

A2.1. 
Summary Table on 2019-2022 CSRs 
A3.1. 
Key elements of Lithuania's RRP 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key energy indicators 
A8.1. 
Key indicators for a fair transition in Lithuania 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Lithuania 
A14.2.  Situation of Lithuania on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level - Lithuania 
A18.1.  Financial soundness indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Lithuania 
A21.2.  Heat map of fiscal sustainability risks - Lithuania 
A22.1.  Assessment of macroeconomic imbalances matrix 

LIST OF GRAPHS 

Progress towards the SDGs in Lithuania in the last 5 years 
Disbursements per pillar 
Fulfilment status of milestones and targets 
Cohesion policy funds 2021-2027 in Lithuania: budget by fund 
Synergy between Cohesion policy funds and RRF pillars in Lithuania 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Lithuania 
Thematic – greenhouse gas emissions from the effort sharing ESR sectors in Mt CO2eq, 2005-2021 
Thematic - Energy mix (top) and electricity mix (bottom), 2021 
Thematic – environmental investment needs and current investment, p.a. 2014-2020 
Share of gas consumption per sector, 2021 
Lithuania´s retail energy prices for industry (top) and households (bottom) 
Public R&I investment in Energy Union R&I priorities 
Fair transition challenges in Lithuania 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
Trend in material use 
Treatment of municipal waste 

A1.1. 
A3.1. 
A3.2. 
A4.1. 
A4.2. 
A4.3. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  Public R&D intensity 2010-2021 
A12.1.  Labour productivity per sector 
A12.2.  Business environment and productivity drivers 
A16.1.  Life expectancy at birth, years 
A17.1.  GDP per capita (in purchasing power standard) in Lithuania by NUTS-3 region, 2020 
A17.2.  Lithuania, Regional Competitiveness Index, 2022 
A18.1.  Evolution of credit activity 
A19.1.  Tax revenues from different tax types, % of total revenue 
A19.2.  Tax wedge for single and second earners, % of total labour costs, 2022 

27 
29 
34 
35 
40 
44 
47 
50 
52 
56 
57 
59 
60 
62 
65 
68 
70 
72 
74 
76 
77 
78 

25 
29 
30 
31 
31 
32 
35 
36 
37 
40 
41 
42 
44 
45 
47 
48 
52 
55 
55 
65 
68 
69 
70 
73 
73 

22 

 
 
 
 
 
23 

 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

This  Annex  assesses  Lithuania’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change  and  the 
environmental crisis, while ensuring that no one is 
left  behind.  The  EU  and  its  Member  States  are 
committed  to  this  historic  global  framework 
agreement  and  to  playing  an  active  role  in 
maximising  progress  on  the  SDGs.  The  graph 
below  is  based  on  the  EU  SDG  indicator  set 
developed  to monitor progress  on  the  SDGs  in  an 
EU context. 

While  Lithuania  performs  well  on  several  of 
the  SDG  indicators  related  to  environmental 
sustainability  (SDGs  13,  14,  15),  it  needs  to 
catch  up  with  the  EU  average  on  others 
(SDGs  2,  6,  7,  11).  On  SDG  7  (Affordable  and 

clean  energy),  Lithuania  has  achieved  significant 
progress in its share of renewable energy in total 
energy consumption, which increased from 25.6% 
in  2016  to  28.2%  in  2021  and  is  well  above  the 
EU  average  (21.8%  in  2021).  Similarly,  progress 
has  been  made  on  other  energy 
indicators, 
including  energy  productivity  (from  4.6%  in  2016 
to  5.1%  in  2021),  which  was  still  significantly 
below the EU average (8.5%) in 2021. Measures to 
increase  Lithuania’s  performance  are  included  in 
Component  2  (Green  transformation  of  Lithuania) 
of the recovery and resilience plan (RRP). The plan 
focuses  on  investments  in  mobility  infrastructure 
and  public  transport  for  sustainable  mobility, 
together  with  investment  in  additional  solar  and 
wind energy capacity to provide additional security 
of  supply  and 
to  accommodate 
flexibility 
renewable  energy  sources  in  the  grid.  However, 
Lithuania  is  underperforming  compared  to the  EU 
average  on  SDG  6  (Clean  water  and  sanitation) 
and SDG 11 (Sustainable cities and communities), 
while it is moving away from the goals on SDG 13 

Graph A1.1: Progress towards the SDGs in Lithuania in the last 5 years 

Note: For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; 
for details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable 
development indicators – Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all indicators for the 
specific goal compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but 
signals that it is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends 
over the past 5 years. The calculation does not take into account any target values as most EU policy targets are only valid for 
the aggregate EU level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

24 

 
 
 
 
 
 
average of 151. Several reforms and investments 
transformation  for 
(Digital 
in  Component  3 
growth)  of  the  RRP  focus  on  further  developing 
digital infrastructure and equipment and improving 
the  quality  of  education  and  digital  skills  at  all 
levels. 

Lithuania  is  improving  on  SDG  indicators 
related  to  macroeconomic  stability  (SDGs  8, 
16, 17), but still needs to catch up compared 
to  the  EU.  It  continues  to  perform  below  the  EU 
average  on  the  investment  share  of  GDP  (SDG  8) 
but increased it from 19.9% in 2016 to 21.4% in 
2021  (EU:  23.2%  in  2022).  The  employment  rate 
and  long-term  unemployment  rate  are  improving 
and  performing  better  than  the  EU  average  (79% 
compared to EU 74.6% and 2.3% compared to EU 
2.4%  respectively  in  2022).  On  the  negative  side, 
the  indicator  on  young  people  not  in  education, 
employment  or  training  has  deteriorated  (from 
10.2% in 2017 to 10.7% in 2022). Lithuania needs 
to  catch  up  with  the  EU  average  on  SDG  16 
(Peace,  justice  and  strong  institutions),  where  the 
Corruption  Perceptions  Index  improved  from  59% 
in  2017  to  62%  in  2022,  and  the  general 
government  total  expenditure  on  law  courts  per 
capita  increased  from  36.9  EUR  in  2016  to  46.6 
EUR, however, still far from the EU average 107 in 
2021.  

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

(Climate action) and SGD 15 (Life on land).  

important 

Lithuania  is  performing  well  on  four  SDG 
indicators  related  to  fairness  (SDGs  1,  4,  5, 
10),  but  still  needs  to  catch  up  on  several 
others  (SDGs  3,  7,  8).  It  reduced  the  risk  of 
poverty  or  social  exclusion  (SDG  1)  from  30%  in 
2016 to 23.5% in 2021, although it remains above 
regional 
the  EU  average  of  21.7%.  While 
disparities  also 
issue, 
remain  an 
Lithuania  has  achieved  significant  progress  on 
SDG  10  (Reduced  inequalities).  While  the  urban-
rural gap for the risk of poverty or social exclusion 
narrowed from 18.6% in 2016 to 9.8% in 2021, it 
is still considerably above the EU average of 0.6%. 
On SDG 3 (Good health and well-being), Lithuania 
is still underperforming on all these indicators and 
challenges  compared  to  the  EU  average.  This 
concerns in particular healthy life years at birth  – 
56.8 years in 2020 compared to the EU average of 
64.0  years.  At  the  same  time,  while  progress  has 
been  made  in  all  causes  of  death  indicators, 
especially 
in  road  traffic  deaths,  where  the 
indicator fell from 6.6% in 2016 to 5.3% in 2021, 
Lithuania lagged behind the EU average of 4.5% in 
2021.  RRP  Component  7  (More  opportunities  for 
everyone  to  actively  build  national  well-being) 
includes  measures  aimed  at 
the 
minimum income scheme and improving the social 
safety  net  in  Lithuania.  Measures  included  in 
Component  1  (A  resilient  and  future-proof  health 
system)  are  expected  to  improve  the  resilience, 
accessibility and quality of health services as well 
as increase the quality, affordability and efficiency 
of the healthcare system. 

reforming 

Lithuania  performs  well  or  is  improving  on 
SDG  indicators  related  to  productivity  (SDGs 
4,  8,  9).  Its  performance  on  SDG  4  (Quality 
education)  is  improving,  but  further  efforts  are 
needed to reach the EU average on participation in 
early  childhood  education,  which  increased  from 
87.3%  in  2015  to  90.9%  in  2020  (EU:  93%  in 
2020),  and  on  adult  learning,  up  from  5.9%  in 
2017  to  8.5%  in  2021  (EU:  11.9%  in  2022).  In 
Lithuania,  the  share  of  households  with  a  high-
speed internet connection in 2021 (SDG 9; 78.2%) 
was  significantly  above  the  EU  average  (70.2%). 
Lithuania  has  slowly  improved  gross  domestic 
expenditure  on  R&D,  which  rose  from  0.84%  of 
GDP  in  2016  to  1.11%  of  GDP  in  2021  (EU 
average  2.26%).  Furthermore,  the  country  is  still 
lagging some way behind in patent applications to 
the  European  Patent  Office,  with  28  applications 
per  million  inhabitants  in  2022  against  the  EU 

25 

 
 
 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (47) 
addressed  to  Lithuania  as  part  of  the  European 
Semester. These recommendations concern a wide 
range of policy areas that are related to 14 of the 
17 Sustainable Development Goals (see Annexes 1 
and 3). The assessment considers the policy action 
the 
taken  by  Lithuania 
commitments  in  its  recovery  and  resilience  plan 
(RRP) (49).  At  this  stage  of  RRP  implementation,  % 
of  the  CSRs  focusing  on  structural  issues  from 
‘some 
2019-2022  have 
progress’,  while  5%  recorded  ‘limited  progress’ 
(see  Graph  A2.1).  As  the  RRP  is  implemented 
further,  considerable  progress 
in  addressing 
structural CSRs is expected in the years to come. 

to  date (48)  and 

recorded  at 

least 

Graph A2.1: Lithuania’s progress on the 2019-
2022 CSRs (2023 European Semester) 

Source: European Commission. 

(47)  2022 CSRs: EUR-Lex - 32022H0901(15) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(15) - EN - EUR-Lex 

(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(15) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(15) - EN - EUR-Lex 
(europa.eu) 

(48)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(49)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

26 

 
 
 
 
                                                 
 
  
 
 
 
Table A2.1: Summary Table on 2019-2022 CSRs 

(Continued on the next page) 

27 

LithuaniaAssessment in May 2023RRP coverage of CSRs until 2026Relevant SDGs2019 CSR 1Some progressImprove tax compliance and Some progressRelevant RRP measures being implemented as of 2021, 2022, 2023 and 2024SDG 8, 16broaden the tax base to sources less detrimental to growth.Some progressRelevant RRP measures being implemented as of 2022SDG 8, 10, 12Address income inequality, poverty and  social exclusion,  including by improving the design of the tax and  benefit system.Some progressRelevant RRP measures being implemented as of 2021, 2022, 2023 and 2024SDG 1, 2, 8, 10, 122019 CSR 2Some progressImprove quality and efficiency at all education and training levels, including adult learning. Some progressRelevant RRP measures being implemented as of 2021 and 2022SDG 4Increase the quality, Some progressRelevant RRP measures being planned as of 2022SDG 3affordability and Some progressRelevant RRP measures being planned as of 2022SDG 3efficiency of the healthcare system.Some progressRelevant RRP measures being planned as of 2022SDG 32019 CSR 3Some progressFocus investment-related economic policy on innovation, Some progressRelevant RRP measures being implemented as of  2021, 2022, 2023 and 2026SDG 9, 10, 11energy andSome progressRelevant RRP measures being implemented as of 2021SDG 7, 9, 10, 11, 13resource efficiency, Some progressRelevant RRP measures being planned as of 2022 and 2023SDG 6, 10, 11, 12, 15sustainable transport and Some progressRelevant RRP measures being implemented as of 2021SDG 10, 11energy interconnections, taking into account regional disparities. Substantial progressRelevant RRP measures being implemented as of 2021SDG 7, 9, 10, 11, 13Stimulate productivity growth by improving the efficiency of public investment. Some progressRelevant RRP measures being implemented as of 2022SDG 8, 16Develop a coherent policy framework to support science-business cooperation and Some progressRelevant RRP measures being implemented as of 2021SDG 9consolidate research and innovation implementing agencies.Full implementationRelevant RRP measures being implemented as of 2021SDG 92020 CSR 1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreNot applicableSDG 8, 16Strengthentheresilienceofthehealthsystem,includingbymobilisingadequatefundingandaddressingshortagesinthehealthworkforce and of critical medical products.Some progressRelevant RRP measures being planned as of 2022, 2023 and 2024SDG 3Improve the accessibility and quality of health services.Some progressRelevant RRP measures being planned as of 2022, 2023 and 2024SDG 32020 CSR 2Some progressMitigate the impact of the crisis on employment.Substantial progressRelevant RRP measures being implemented as of 2022SDG 8Increase the funding and coverage of active labour market policy measures Some progressRelevant RRP measures being implemented as of 2022SDG 8and promote skills.Some progressRelevant RRP measures being implemented as of 2021, 2022 and 2024SDG 4Ensurethecoverageandadequacyofthesocialsafetynetandimprovetheeffectivenessofthetaxandbenefitsystemtoprotectagainst poverty.Some progressRelevant RRP measures being implemented as of 2021 and 2022SDG 1, 2, 8, 10, 122020 CSR 3Some progressSupport liquidity for businesses, especially for small- and medium-sized enterprises and export-oriented sectorsSome progressSDG 8, 9Front-load mature public investment projectsSome progressRelevant RRP measures being implemented as of 2021, 2022, 2024, 2025 and 2026SDG 8, 16and promote private investment to foster the economic recovery.Some progressRelevant RRP measures being implemented as of 2021, 2022 and 2025SDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonthe coverage and take-up of very high-capacity broadband, Some progressRelevant RRP measures being implemented as of  2021, 2022, 2023, 2024, 2025 and 2026SDG 9on clean and efficient production and use of energy, Some progressRelevant RRP measures being implemented as of 2022SDG 7, 9, 13and sustainable transport. Some progressRelevant RRP measures being implemented as of 2021SDG 11Promotetechnologicalinnovationinsmallandmedium-sizedenterprises.Some progressRelevant RRP measures being implemented as of 2021SDG 8, 9 
 
 
 
  
 
Table (continued) 

Note: 
* See footnote (48). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission. 
Source: European Commission 

28 

2021 CSR 1Some progressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationallyfinancedinvestment.Keepthegrowthofnationallyfinanced current expenditure under control. Some progressNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Substantial progressNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition. Substantial progressNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Some progressNot applicableSDG 8, 162022 CSR 1Some progressIn 2023, ensure that the growth of nationally financed primary current expenditure is in line with an overall neutral policy stance, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. Stand ready to adjust current spending to the evolving situationLimited progressNot applicableSDG 8, 16Expand public investment for the green and digital transitions, and for energy security taking into account the REPowerEU initiative, including by making use of the Recovery and Resilience Facility and other Union fundsSubstantial progressNot applicableSDG 8, 16For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions.Substantial progressNot applicableSDG 8, 16Fostercooperativepublicprocurementatcentralgovernmentandmunicipality levels.Some progressSDG 92022 CSR 2Proceed with the implementation of its recovery and resilience plan, in line with the milestones and targets included in the Council Implementing Decision of 20 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation2022 CSR 3Some progressStrengthen primary and preventive care.Some ProgressRelevant RRP measures being  planned as of  2023, 2024, 2025 and 2026SDG 3Reducefragmentationintheplanninganddeliveryofsocialservicesand improve their personalisation and integration with other services.Some ProgressRelevant RRP measures being implemented as of  2021, 2022, 2023, 2024, 2025 and 2026 SDG 1, 2, 10Improve access to and quality of social housing.Limited ProgressSDG 1, 2, 102022 CSR 4Some progressReduce overall reliance on fossil fuelsSome ProgressRelevant RRP measures being implemented as of  2022, 2024, 2025 and 2026 SDG 7, 9, 13by accelerating the deployment of renewablesSome ProgressRelevant RRP measures being implemented as of  2022, 2023 and 2026 SDG 7, 9, 13andincreasingenergyefficiencyanddecarbonisationofindustry,[transport] and buildings,Limited ProgressRelevant RRP measures being planned as of  2024, 2025 and 2026SDG 7and [increasing energy efficiency and decarbonisation] of transportSome ProgressRelevant RRP measures being planned as of  2026SDG 11and ensure sufficient capacity of energy interconnections.Substantial ProgressRelevant RRP measures being implemented as of  2022, 2023 and 2026SDG 7, 9, 13RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience  against  future  shocks.  The  RRF 
also  contributes  to  implementation  of  the 
SDGs  and  helps  to  address  the  Country 
Specific  Recommendations  (see  Annex 2). 
its  current  recovery  and 
Lithuania  submitted 
resilience  plan  (RRP)  on  14  May  2021.  The 
Commission’s positive assessment on 2 July 2021 
and Council’s approval on 20 July 2021 paved the 
way for disbursing EUR 2.2 billion in grants under 
the RRF over the 2021-2026 period.   

Table A3.1: Key elements of Lithuania's RRP 

Source: RRF Scoreboard 

Since  the  entry 
into  force  of  the  RRF 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
Lithuania was moreover updated on 30 June 2022 
to  an  amount  of  EUR  2.1  billion  in  grants.  No 
revision  was  submitted  at  the  time  of  publication 
of this country report. 

Lithuania’s progress in implementing its plan 
is  published  in  the  Recovery  and  Resilience 
Scoreboard (26).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 

(26)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

29 

the RRF as a whole, in a transparent manner. The 
graphs in this Annex show the current state of play 
of  the  milestones  and  targets  to  be  reached  by 
Lithuania 
as 
subsequently 
satisfactorily fulfilled by the Commission. 

assessed 

and 

EUR 831.45 million has so far been disbursed 
to  Lithuania  under  the  RRF.  The  Commission 
disbursed  EUR 289.15  million  to  Lithuania  in  pre-
financing  on  17  August  2021,  equivalent  to  13% 
of the initial financial allocation.  

Lithuania’s  first  payment  request  was  positively 
assessed  for  31  out  of  33  associated  milestones 
by the Commission, taking into account the opinion 
of the Economic and Financial Committee, leading 
to  EUR  542.3  million  being  disbursed  in  financial 
support  (net  of  pre-financing)  on  10  May  2023. 
The  related  31  milestones  cover  reforms  and 
investments  in  the  areas  of  education,  green  and 
and 
social 
digital 
employment  support,  science  and  innovation,  as 
well as the public sector and tax compliance. 

protection 

transition, 

Graph A3.1: Total grants disbursed under the RRF 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard 

Current RRPScope Initial planCID adoption date20 July 2021Total allocation EUR 2,2 billion in grants (4.0% of 2021 GDP) and EUR 0 billion in loansInvestments and reforms 3 investments and 27 reforms Total number of milestones and targets191 
 
 
  
 
                                                 
 
 
 
  
 
 
Graph A3.1: Disbursements per pillar 

Note: Each disbursement reflects progress in the implementation of the RRF, across the six policy pillars. This graph displays how 
disbursements under the RRF (excluding pre-financing) relate to the pillars. The amounts were calculated by linking the milestones 
and targets covered by a given disbursement to the pillar tagging (primary and secondary) of their respective measures. 
Source: RRF Scoreboard 

Graph A3.2: Fulfilment status of milestones and 
targets 

Note: This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard 

30 

Satisfactorily fulfilledNot fulfilled0 mn20 mn40 mn60 mn80 mn100 mn120 mn140 mn160 mnGreen transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
 
     
     
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives.   

Graph A4.1: Cohesion policy funds 2021-2027 in 
Lithuania: budget by fund 

(1) million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

In  2021-2027,  in  Lithuania,  cohesion  policy 
funds (27) will invest EUR 4 billion in the green 
transition  and  EUR  284  million  in  the  digital 
transformation as part of the country’s total 
allocation  of  EUR  7.8  billion.  In  particular,  the 
European  Regional  Development  Fund  (ERDF) will 
boost  R&D, 
innovation  and  digitalisation  by 
supporting almost 6 400 companies. Investment in 
energy  efficiency  and  the  renovation  of  buildings 
will save energy and reduce heating costs for over 
100 000  households  and  over  200  public 
buildings.  Lithuania  will  purchase  500  zero-
emission  public  transport  vehicles  and  install 
3 000  recharging  stations  for  electric  vehicles. 
Particular  attention  will  be  paid  to  monitoring 
progress  in  lowering  energy  consumption  and 
greenhouse  gas 
(GHG)  emissions,  which  are 
priorities  in  2021-2027.  The  Just  Transition  Fund 
(JTF)  will  enable  further  decarbonisation  and 
economic  diversification,  and  help  create  jobs  by 
attracting  investment  and  supporting  the  up-  and 
reskilling  of  workers  in  the  counties  of  Kaunas, 
Šiauliai and Telšiai. This will help Lithuania reduce 
industries  and 
emissions  from  GHG-intensive 
address  the  related  negative  social  and  economic 

(27)  European Regional Development Fund (ERDF), Cohesion Fund 
(CF), European Social Fund+ (ESF+), Just Transition Fund 
(JTF), excluding Interreg programmes. The total amount 
includes national and EU contributions. Data source: 
Cohesion Open Data.  

effects.  Under  the  European  Social  Fund  Plus 
(ESF+), Lithuania allocates over EUR 441 million to 
social  inclusion.  In  addition,  about  EUR  80  million 
is  dedicated  to  food  and  meeting  the  basic 
material needs of society’s most deprived people. 

Of  the  investments  mentioned  above,  EUR 
1.2  billion  will  be  invested  in  line  with 
REPowerEU objectives. This is on top of the EUR 
974  million  dedicated  to  REPowerEU  under  the 
2014-2020 budget. EUR 709 million (2021-2027) 
and EUR 519 million (2014-2020) is for improving 
energy  efficiency;  EUR  349  million  (2021-2027) 
and EUR 455 million (2014-2020) is for renewable 
energy  and  low-carbon  R&I;  and  EUR  97  million 
(2021-2027) is for smart energy systems. 

Graph A4.2: Synergy between Cohesion policy 
funds and RRF pillars in Lithuania 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR  7  billion  available (28),  with  an  absorption 
of  89% (29).  Including  national  financing,  the  total 
investment  amounts  to  EUR  8.2  billion  -  around 
2.7% of GDP for 2014-2020.  

flexibility 

Lithuania continues to benefit from cohesion 
policy 
support  economic 
to 
recovery,  step  up  convergence  and  provide 
vital support to regions following the COVID-
19  pandemic.  The  Recovery  Assistance  for 
Cohesion and the Territories of Europe instrument 

(28)  Cohesion policy funds include the ERDF, CF, ESF and the 
Youth Employment Initiative (YEI). ETC programmes are 
excluded here. According to the ‘N+3 rule’, the funds 
committed for 2014-2020 must be spent by 2023. REACT-
EU is included in all figures. Total amount including EU and 
national co-financing.  Data source: Cohesion Open Data. 

(29)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

31 

1.469 19%4.642 59%1.398 18%321 4%CFERDFESF+JTF3.4382691.3732.0554171964.0322771.0101.076561532050010001500200025003000350040004500Green transitionDigitaltransformationSmart, sustainableand inclusivegrowthSocial and territorialcohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgenerationEU CP 2014-2020 (million EUR)EU CP 2021-2027 (million EUR) 
 
  
                                                 
  
                                                 
 
 
(REACT-EU) (30)  under  NextGenerationEU  provides 
EUR  324  million  on  top  of  the  2014-2020 
cohesion policy allocation for Lithuania. REACT-EU 
provided  support  supported  150  firms  to  expand 
their  e-business  models  and  supported  R&D  on 
new  anti-COVID-19  products  and  technologies. 
Funding  was  also  provided  for  active  labour 
market  measures  for  almost  800  unemployed 
people. In addition, Cohesion’s Action for Refugees 
in Europe (CARE) supports Lithuania and its regions 
in  providing  emergency  assistance  to  people 
fleeing  from  Russia’s  invasion  of  Ukraine.  With 
SAFE  (Supporting  Affordable  Energy),  the  2014-
2020 cohesion policy funds may also be mobilised 
by  Lithuania  to  support  vulnerable  households, 
jobs  and  companies  particularly  affected  by  high 
energy prices.  

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in 
Lithuania 

2027.  The  two  CAP  Funds  (European  Agricultural 
Guarantee  Fund  and  European  Agricultural  Fund 
for Rural Development), contribute to the European 
Green Deal while ensuring long-term food security. 
They promote social, environmental and economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  in  coordination  with  other  EU  funds. 
The  European  Maritime  and  Fisheries  Fund  made 
EUR  63  million  available  to  Lithuania  in  2014-
2020  and  the  European  Maritime,  Fisheries  and 
Aquaculture  Fund  allocates  EUR  61  million  in 
2021-2027.  

Lithuania  also  benefits  from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far  allocated  EU  funding  of  EUR  170.1  million  to 
three  specific  projects  on  strategic  transport 
networks.  Similarly,  Horizon  Europe  has  so  far 
allocated more than EUR 32.5 million to Lithuanian 
R&I on top of the EUR 95 million earmarked under 
the  previous  programme  (Horizon  2020).  The 
Public  Sector  Loan  Facility  set  up  under  the  Just 
Transition  Mechanism  makes  EUR  21  million  of 
grant  support  from  the  Commission  available  for 
projects located in Lithuania for 2021-2027, which 
will  be  combined  with  loans  from  the  EIB  to 
support  investments  by  public  sector  entities  in 
just transition regions.  

received 

support  under 

Lithuania 
the 
European  instrument  for  temporary  support 
to  mitigate  unemployment  risks 
in  an 
emergency  (SURE)  to  finance  short-time  work 
schemes  and  similar  measures  to  mitigate  the 
impact of COVID-19. The Council granted financial 
assistance to Lithuania of EUR 1.1 billion in loans, 
which supported around 21% of workers and 27% 
of firms in 2020, and around 19% of workers and 
27% of firms in 2021. 

Instrument 
designing 

The  Technical  Support 
(TSI) 
supports 
in 
Lithuania 
and 
reforms, 
implementing  growth-enhancing 
including  those  set  out  in  its  recovery  and 
resilience  plan  (RRP).  Lithuania  has  received 
significant  support  since  2017.  Examples (32) 
include support to develop a strategic roadmap for 
the  digitisation  of  industry,  to  strengthen  the 
pension  system  and  to  map  the  regulatory 
framework  for  sustainable  financing  and  to 

(32)  Country factsheets on reform support are available here. 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
the  Sustainable  Development  Goals 
to 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
notably SDG 9 ‘Industry, innovation, infrastructure’ 
and SDG 7 ‘Affordable and clean energy’ (31). 

for 

Other  EU  funds  make  significant  resources 
available 
common 
Lithuania. 
agricultural  policy  (CAP)  made  EUR  6.1  billion 
available  in  2014-2022  and  will  continue  to 
support  Lithuania  with  EUR  4.0  billion  in  2023-

The 

(30)  REACT-EU allocation on Cohesion Open Data. 

(31)  Other EU funds contribute to the implementation of the 
SDGs, in 2014-2022 this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

32 

2.0061.139731271.5091.6441.27892492284905001.0001.5002.0002.500SDG 9 Industry,innovation,infrastructureSDG 7 Affordableand clean energySDG 1 No povertySDG 11Sustaimable citiesSDG 8 Decent workand economicgrowthEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
  
                                                 
                                                 
identify  barriers  to  the  growth  of  green  finance 
products.  

33 

 
ANNEX 5: RESILIENCE 

This  Annex  illustrates  Lithuania’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (33).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (34)  and  capacities (35)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and  their  underlying  areas  for  Lithuania  and  the 
EU-27 (36). 

indices,  which 

in 

capacities 

medium-high 
the  geopolitical 
dimension.  Lithuania  shows  stronger  capacities 
than the EU average in the areas of ‘cybersecurity’, 
‘digitalisation  of  the  public  space’,  ‘value  chains 
and  trade’  and  ‘raw  material  and  energy  supply’. 
There  is  ample  room  for  improving  capacities 
compared to the EU in the areas ‘health, education 
and  work’,  ‘financial  globalisation’,  'ecosystems, 
biodiversity  and  sustainable  agriculture’  and 
‘climate change mitigation and adaptation’. 

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

According  to  the  set  of  resilience  indicators 
under the RDB, Lithuania generally displays a 
similar  level  of  vulnerabilities  compared  to 
the  EU  average.  Lithuania  shows  medium 
in  the  digital  and  geopolitical 
vulnerabilities 
dimensions  of 
the  RDB  and  medium-low 
vulnerabilities  in  the  social  and  economic  and 
green dimensions. It has higher vulnerabilities than 
the  EU  average  in  the  areas  ‘digitalisation  of  the 
personal  space’  and  ‘raw  material  and  energy 
supply’. Lithuania has relatively low vulnerabilities 
in relation to ‘inequalities and the social impact of 
the  transitions’,  ‘climate  change  mitigation  and 
adaptation’, 
and 
for 
‘cybersecurity’, among others.  

industry’, 

‘digital 

Compared  to  the  EU  average,  Lithuania 
shows  an  overall  lower  level  of  capacities 
across  all  RDB  indicators.  It  has  medium 
resilience  capacities  in  the  social  and  economic, 
the  digital  dimensions,  and 
the  green  and 

Note: Data are for 2021, and EU-27 refers to the value for 
the EU as a whole. Data underlying EU-27 vulnerabilities in 
the area ‘value chains and trade’ are not available as they 
comprise partner concentration measures that are not 
comparable with Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

(33)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(34)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(35)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(36)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

34 

LTEU-27LTEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

green 

transition 

Lithuania’s 
requires 
continued action on several aspects including 
promoting  energy  efficiency,  sustainable 
biodiversity. 
transport 
Implementation  of  the  European  Green  Deal  is 
underway  in  Lithuania;  this  Annex  provides  a 
snapshot of the aspects involved (37). 

protecting 

and 

Lithuania is projected to reach its new 2030 
climate  policy  target  for  the  effort  sharing 
sectors, if it implements additional measures 
tabled (38).  Data 
for  2021  on  Lithuania’s 
greenhouse  gas  emissions  in  these  sectors  are 
expected to show the country generated less than 
its annual emission allocations (39). Current policies 
in  Lithuania  are  projected  to  reduce  these 
emissions by 11% relative to 2005 levels in 2030, 
more  than  sufficient  to  reach  the  effort  sharing 
target set before it was raised in line with the EU’s 
55%  emission  reduction  objective.  The  additional 
measures 
the  emission 
reductions  to  23%,  exceeding  the  new  target  to 
reduce  by  21% (40).  In  its  recovery  and  resilience 
plan,  Lithuania  has  allocated  37.8 %  of 
its 
Recovery  and  Resilience  Facility  grants  to  key 

tabled  would  bring 

(37)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(38)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(39)  Lithuania’s annual emission allocations for 2021 were some 
16.0 Mt CO2eq, and its approximated 2021 emissions were 
14.6 Mt (see European Commission, Accelerating the 
transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343). 

(40)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021. 

reforms  and  investments  to  support  the  climate 
objectives (41). 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing ESR sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency. 

In  the  past  decade,  Lithuania’s  land  use 
sector  net  carbon  removals  has  been  static. 
To boost the capacity of its land use sector to act 
as  a  carbon  sink,  Lithuania’s  recovery  and 
resilience  plan  has  measures  on 
restoring 
degraded  peatlands.  For  2030,  Lithuania’s  target 
for  the  land  use,  land  use  change  and  forestry 
of 
(LULUCF) 
4 633 kt CO2eq (see Table A6.1) (42). 

removals 

implies 

sector 

inland 

In  2021,  the  renewable  share  of  Lithuania’s 
energy mix is increasing but natural gas still 
represent a high share of the country’s gross 
inland  consumption.  With  a  share  of  28%  of 
by 
consumption 
gross 
renewables 
increases  the 
in  2021,  Lithuania 
decarbonisation of its energy mix, with an increase 
of 4pp since 2019. Oil still accounts for the larger 
share  of  the  Lithuanian  energy  mix,  with  43%  of 
the gross inland consumption in 2021, a decrease 
of 4pp since 2019. The share of natural gas in the 
energy  mix  keeps  its  negative  trend.  Solid  fossil 
fuels complete the mix, at 3%. 

generated 

(41)  For example, measures that aim to increase the generation 
and storage of renewable energy, sustainable mobility, 
building renovation, restoring degraded peatlands, and the 
circular economy. 

(42)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

35 

024681012141620052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
     
                                                 
 
 
 
Graph A6.2: Thematic - Energy mix (top) and 
electricity mix (bottom), 2021 

reforms and investments to further decarbonise its 
economy. 

Lithuania 
is  to  accelerate  the  energy 
renovation of its building stock and increase 
its  energy  efficiency  by  tapping  more  of  the 
potential  in  its  industrial  sector  to  reach  its 
current NECP objectives. Lithuania NECP targets 
for  primary  and  final  energy  consumption  (PEC 
and  FEC)  were  both  considered  of  modest 
ambition  in  the  2020  Commission  assessment. 
Based  on  the  energy  consumption  trajectory  for 
2018-2021,  Lithuania  is  not  expected  to  be  on 
track to meet its 2030 target for both primary and 
final  energy  consumption,  as  these  were  notified 
in  its  NECP (43).  To  promote  energy  efficiency,  its 
recovery  and  resilience  plan  allocates  support  to 
expedite  the  renovation  of  buildings  in  line  with 
up-to-date  building 
It 
supports  its  building  industry  by  promoting  the 
supply  of  construction  products  and  services 
needed  to  speed  up  the  renovation  of  buildings. 
Lithuania  has  untapped  potential  to  increase  its 
energy  efficiency,  particularly  in  the  industrial 
sector,  which  is  noticeably  more  energy-intensive 
and  natural  gas-reliant  than  the  EU  average,  and 
in  its  stock  of  existing  buildings.  With  75%  of  its 
building  stock  surface  built  before  1992,  under 
less  stringent  building  code  requirements,  it  is  a 
priority to target those buildings in implementation 
programmes  and  in  the  earmarked  budget  to 
ensure  the  fully  decarbonisation  of  the  building 
stock by 2050. 

renovation  standards. 

transport 

Lithuania’s share of zero-emission passenger 
cars in new car registrations is below the EU 
average.  The  use  of  public 
is 
decreasing, accounting for only 5.9% of passenger 
travel in 2020 (9.4% in 2019), which is the lowest 
share  in  the  EU  (EU  average  in  2020:  13.8%) (44). 
The  transport  sector  generates  the  highest  share 
of  greenhouse  gas  emissions  in  Lithuania,  while 
only  8%  of  the  railroad  network  is  electrified. 
Lithuania’s  recovery  and  resilience  plan  aims  to 
improve  the  sustainability  of  its  transport  sector 
by  building  infrastructure  to  produce  alternative 
fuels  and  charging/filling  infrastructure  for  all 
types  of  clean  vehicles  with  alternative  fuels. 
However,  Lithuania  still  has  significant  scope  to 

(43)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase. 

(44)  Source: EU Transport in Figures. Statistical Pocketbook 2022. 

Note: The energy mix is based on gross inland consumption, 
and excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste.  
Source: Eurostat.  

Renewable  energy  represents  an  increasing 
share  of  Lithuania’s  energy  and  electricity 
gross  final  consumption.  Between  2020  and 
the  share  of  Lithuania’s  gross  final 
2021, 
consumption  of  energy  from  renewable  sources 
rose  from  27%  to  28%.  In  gross  electricity 
consumption,  renewables  accounted  for  a  21.3% 
share in 2021 (+1.1 percentage point). Lithuania’s 
target  of  45%  share  of  energy  from  renewable 
sources  in  gross  final  energy  consumption  by 
2030 
in  the  NECP  was  considered 
sufficiently  ambitious.  Lithuania  will  need  to 
increase 
in  the 
its  renewable  energy  target 
updated  NECP  to  reflect  the  more  ambitious  EU 
climate  and  energy  targets  in  the  Fit  for  55 
Package  and  in  the  REPowerEU  Plan.  Such  a 
strengthening of the Lithuanian NECP could reflect 
the  recently  adopted  ambitious  national  objective 
to reach a share of renewably produced electricity 
in  the  gross  final  consumption  to  38%  by  2025, 
and  50%  by  2030.  Under 
its  recovery  and 
resilience  plan,  Lithuania  is  rolling  out  crucial 

included 

36 

25%2%73%GasOilRenewables3%26%43%28%Solid fossil fuels, peatand oil shaleGasOilRenewables 
  
                                                 
increase the green transition of its transport sector 
by  putting  a  stronger  emphasis  on  rail  transport 
and  well-integrated  multimodal  public  transport. 
Individual 
seasonal 
problems  with  air  pollution  and  causes  significant 
health  issues  and  economic  costs,  particularly  in 
the capital, Vilnius.  

exacerbates 

transport 

Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a. 2014-2020 

Source: European Commission. 

Lithuania would benefit from investing more 
in environmental protection and in measures 
protecting 
biodiversity  and  addressing 
pollution (45).  Between  2014  and  2020,  the 
environmental  investment  needs  were  estimated 
to be at least EUR 1.6 billion while investment was 
at  about EUR 0.7 billion, leaving a gap  of at least 
EUR 0.9  billion  per  year  (see  Graph  A6.3) (46). 
Lithuania’s terrestrial Natura 2000 network covers 
12.6%  of  its  land (47).  Two  thirds  of  the  habitats 
protected  under  EU 
in  an 
unfavourable  conservation  status,  under  pressure 
from  forestry,  agriculture,  and  invasive  species. 
Lithuania  has  yet  to  complete  its  Natura  2000 

legislation  are 

(45)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Lithuania). 

(46)  When also accounting for needs estimated at EU level only 

(e.g., water protection, higher circularity, biodiversity 
strategy). 

(47)  In 2021, Lithuania had 17% with nationally designated 

areas, against the EU average of 18.6% of territory covered 
by Natura 2000 and 26.4% average for the network of 
designated areas (European Environment Agency, 2023, 
Natura 2000 Barometer). 

from 

emissions 

agriculture 

designations  and  put  in  place  clear  site-specific 
conservation objectives and measures for all sites. 
Ammonia 
are 
hampering efforts to reduce air pollution, and the 
downward  trend  in  air  pollution  emissions  is  not 
strong  enough  for  Lithuania  to  meet  its  emission 
reduction  commitments.  Despite  considerable 
progress, 
water 
management. Only half of all surface water bodies 
Infrastructure 
achieve  good  ecological  status. 
investment is needed to reduce leaks and improve 
nature-based 
river 
restoration  (see  also  Annex  9). Lithuania  also  has 
the potential to rely more on environmental taxes 
to  further  internalise  the costs  of  air pollution (48) 
(see Annex 19). 

challenges 

prevention 

remain 

flood 

and 

in 

in 

the 

Climate  change  is  affecting  several  sectors 
and ecosystems in Lithuania, with adaptation 
challenges  particularly 
coastal 
region (49).  Between  1980  and  2020, 
total 
economic  losses  from  weather-  and  climate-
related  events  in  Lithuania  amounted  to  almost 
EUR 1.5  billion (50).  The  highest  climate-related 
risks relate to (coastal) flooding and windstorms in 
the  western  part  of  the  country (51).  The  most 
climate-sensitive  sectors  are  agriculture,  public 
health, 
and 
industry, 
communication  infrastructure.  Lithuania’s  revised 
national energy and climate action plan addresses 
risks  with  policy  measures  such  as 
these 
research  and  climate 
promoting  adaptation 
proofing  infrastructure (52).  The  rising  number  of 
heatwaves  is  projected  to  affect  heat-related 
mortality,  morbidity,  and  the  transport  system, 
especially in urban areas like Vilnius (53).  

transport, 

energy, 

Lithuania  provides  fossil  fuel  and  other 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 

(48)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay, Ensuring that polluters pay 
(europa.eu). 

(49)  European Environmental Agency, Advancing towards climate 

resilience in Europe, forthcoming. 

(50)  European Environmental Agency, Economic losses from 
climate-related extremes in Europe, published on 
03/02/2022. 

(51)  Lithuanian Hydrometeorological Service, Climate Change. 

(52)  National Energy and Climate Action Plan of the Republic of 

Lithuania for 2021-2030. 

(53)  Lithuanian Hydrometeorological Service, Climate Change in 

Vilnius. 

37 

13716114915962286237213754700.0100.0200.0300.0400.0500.0600.0700.0800.0Pollutionprevention andcontrolWater (industries,excl. protection)Circular economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
       
                                                 
                                                 
tax 

include 

the  energy 

food  and  energy  security  and  mitigating 
social  effects.  In  2021,  fossil  fuel  subsidies 
amounted to  EUR  198  million,  putting low  carbon 
alternatives  to  a  disadvantage.  Examples  of  such 
subsidies 
relief  for 
companies  in  agriculture  and  forestry  for  gas  oil, 
the excise tax exemption and tax relief for natural 
gas  for  industrial  consumers  or  the  reduced  CO2 
tax  rate  on  diesel  used  in  agriculture.  Lithuania 
plans  to  abolish  all  tax  relief  schemes  for  fossil 
fuels  by  2024  and  has  submitted  draft 
amendments  to  the  Law  on  Excise  Duties  to 
Parliament.  The  amendments  include  abolishing 
excise  duties  reductions  on  fossil  fuels  and 
including  the  carbon  dioxide  component  in  the 
excise  duties  on  energy  products.  The  positive 
is 
fiscal 
estimated  at  EUR  79  million  in  2025  while  CO2 
component would lead to doubling of that amount. 

impact  of  the  excise  tax  revision 

38 

 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Source: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

39 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp13.37%8%8%6%--21%-10-6Net carbon removals from LULUCF (2)kt CO2eq-4,153-6,552-5,583-5,883-6,636-6,091-4633n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%17%26%25%25%27%28%45%Energy efficiency: primary energy consumption (3)Mtoe8.16.26.46.36.26.65.5Energy efficiency: final energy consumption (3)Mtoe4.75.35.65.65.35.74.5201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP1.91.92.01.91.91.92.42.22.2Environmental taxes (% of total taxation) (4)% of taxation 6.56.56.66.26.25.85.95.65.5Government expenditure on environmental protection% of total exp.1.61.51.41.51.31.41.71.61.6Investment in environmental protection (5) % of GDP0.40.20.30.4--0.40.40.4Fossil fuel subsidies (6)EUR2021bn0.30.30.20.20.20.253.050.0-Climate protection gap (7) score 1-41.31.21.5Net greenhouse gas emissions1990 = 10042.043.043.043.042.043.076.069.072.0Greenhouse gas emission intensity of the economykg/EUR'100.670.670.670.650.64-0.310.300.26Energy intensity of the economykgoe/EUR'100.200.200.200.190.19-0.110.11-Final energy consumption (FEC)2015=100104.1108.2114.3114.3108.2116.3102.994.6-FEC in residential building sector2015=100105.5107.1111.2106.5105.5119.9101.3101.3106.8FEC in services building sector2015=100104.8110.3113.3109.0100.2112.5100.194.4100.7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'103.13.03.13.13.3-0.90.9-Years of life lost due to air pollution by PM2.5per 100.000 inh.817.9576.6840.2777.5570.8-581.6544.5-Years of life lost due to air pollution by NO2per 100.000 inh.91.966.7100.272.053.6-309.6218.8-Nitrates in ground watermg NO3/litre------21.020.8-Land protected areas% of total16.617.0-17.017.017.126.226.426.4Marine protected areas% of total24.1--24.1-22.810.7-12.1Organic farming% of total utilised agricultural area7.58.08.18.18.08.98.59.1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0.20.40.41.13.64.95.48.910.7Number of AC/DC recharging points (AFIR categorisation)---173360648188626330028432518Share of electrified railways%8.08.08.0-8.08.056.6n/a56.6Hours of congestion per commuting driver per year21.020.922.022.0n/an/a28.7n/an/a'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetLithuaniaEUMobilityFiscal and financialindicatorsEnergyPollutionBiodiversityClimate 
 
  
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

synchronisation project is completed by the end of 
2025.  Should  the  Baltic  states  be  desynchronised 
earlier  by  Russia,  Lithuanian  the  gas  demand  is 
likely  to  increase  significantly  since  more  power 
plants will  need to be  activated to ensure system 
adequacy.  

Graph A7.1: Share of gas consumption per sector, 
2021 

imports 

invasion 

Before  Russia's 
of  Ukraine, 
Lithuania was heavily reliant on Russian gas 
and  oil.  However,  the  Klaipeda  liquefied 
natural gas (LNG) terminal allowed Lithuania 
to  already  diversify  its  natural  gas  imports, 
while the country stopped all Russian natural 
gas 
in  April  2022,  as  well  as 
commercial  electricity  trades  with  Russia 
and  Belarus.  Nevertheless,  Lithuania  is  highly 
dependent  on  imported  fossil  fuels  in  general,  as 
well  as  on  electricity  imports.  This  Annex (54)  sets 
out actions carried out by Lithuania to achieve the 
the 
REPowerEU  objectives, 
implementation of its recovery and resilience plan, 
in  order 
improve  energy  security  and 
affordability  while  accelerating  the  clean  energy 
transition,  and  contributing  to  enhancing  the  EU’s 
competitiveness in the clean energy sector (55).  

including 

through 

to 

Lithuania  has  achieved  a  resilient  level  of 
gas supply security in the face of challenging 
circumstances.  Its  natural  gas  infrastructure 
contributes  to  regional  gas  security  of  supply. 
Lithuania  stopped  importing  natural  gas  from 
Russia  in  April  2022  and  has  since  diversified  its 
supply  thanks  to  the  Klaipeda  LNG  terminal,  the 
only  LNG  terminal  in  the  Baltic  States.  It  has  a 
capacity  of  4  billion  cubic  metres  (bcm)/year. 
Lithuania  does  not  benefit  from  a  domestic 
underground  gas  storage  facility,  but  cooperates 
with  Latvia  and  stores  gas  volumes 
in  the 
Inčukalns facility.  

The security of supply of the gas system and 
electricity  system  are 
interlinked.  Gas 
accounted  for  25%  of  gross  electricity  production 
in  2021  (see  Annex  6),  a  share  that  has  been 
fluctuating  but  decreasing  since  2015,  when  it 
amounted to 40%. Lithuania is also heavily reliant 
on  electricity  imports  from  European  countries, 
importing  61%  of  its  electricity  consumption  in 
2021.  Nevertheless,  the  electricity  grid  is  still 
dependent  on  Russia  and  Belarus  until  the 

(54)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty and protect the 
most vulnerable ones, by Annex 9 as the transition to a 
circular economy will unlock significant energy and resource 
savings, further strengthening energy security and 
affordability, and by Annex 12 on industry and single market 
complementing ongoing efforts under the European Green 
Deal and REPowerEU. 

(55)  In line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

Source: Eurostat 

Lithuania has adopted a  comprehensive plan 
with  demand  response  measures  to  address 
security of supply and affordability concerns. 
Lithuania  imports  a  large  share  of  its  electricity, 
which  makes  electricity  affordability  a  bigger 
concern  than  security  of  supply.  The  country 
introduced  additional  energy  saving  measures  in 
2022  to  increase  its  security  of  supply.  It  also 
introduced an energy saving plan to reduce energy 
consumption by 20% in 2 years. This is equivalent 
to  saving  EUR  800  million  otherwise  spent  on 
energy  imports.  The  target  is  mandatory  for  the 
public  sector  and  recommended  for  businesses 
and  individuals.  The  plan  encourages  behavioural 
measures  aimed  at  reducing  energy  consumption 
by  20%  over  2  years  in  the  public  sector, 
complemented by quick payback measures (energy 
audits,  installation  of  automatic  doors,  window 
replacements,  lighting  upgrades)  as  well  as  long-
term  measures  (e.g.  building  renovation  projects). 
Similar 
recommendations  were  directed  at 
municipalities.  Specific  measures  and  a  business 
support  package  of  EUR 2.5  billion  have  been  put 
industry. 
to  support  business  and 
in  place 
Combined  heat  and  power  (CHP)  is  the  second 
hardest-hit  sector,  representing  17%  of  gas 
consumption.  Lithuania  estimates  that  habit-
changing  measures  can  reduce  costs  per  resident 
by  10-20%.  In  households,  long-term  measures 
can reduce costs per resident by 30-50%. Over the 
period  August  2022  –  March  2023,  41%  of  gas 

40 

23.4%58.1%1.6%3.9%11.7%1.3%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery 
 
                                                 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
consumed,  they  may  distort  incentives  to  reduce 
energy  demand  and  impact  heavily  on  public 
finance.  Furthermore,  the  government  extended 
the list of people eligible for heating support: more 
than 110 000 households are expected to benefit 
from  this measure in  the ongoing  heating  season 
(see Annex 8) 

Despite  the  mechanisms 
introduced  by 
Lithuania  to  mitigate  soaring  energy  prices, 
industries  are  being  impacted.  The  surge  in 
energy  prices  has  had  a  considerable  impact  on 
Lithuanian  industry,  as  industry  represented  58% 
of  total  gas  consumption  in  2021,  with  48%  of 
national  consumption  used  by  the  chemical  and 
petrochemical  industry.  Sectors  such  as  fertilisers 
are  badly  affected  by  the  rise  in  gas  prices, 
leading to severe demand reduction. 

Graph A7.2: Lithuania´s retail energy prices for 
industry (top) and households (bottom) 

consumption  has  been  saved 
compared to the previous 5-years average. 

in  Lithuania 

of 

as 

part 

infrastructure 

Lithuania  is  further  upgrading  its  electricity 
grid 
the 
synchronisation  project.  Most  projects  are 
expected  to  be  completed  by  the  end  of  2025 
despite  the  current  context.  However,  the  planned 
second  interconnector  with  Poland,  the  submarine 
HVDC Harmony Link, necessary for the completion 
of the synchronisation project, is facing significant 
delays. It is now expected to be completed only in 
2028,  with  significant  cost  increases  due  to  the 
current  supply  chain  issues.  Lithuania  completed 
work on two gas interconnectors with neighbouring 
countries in 2022: the Gas Interconnection Poland–
Lithuania (GIPL), which became operational in May 
2022,  and  the  enhancement  of  the  Lithuania-
Latvia  Interconnection,  which  was  completed  in 
December  2022.  Both  projects  were  Projects  of 
Common Interest (PCIs) either on the 5th Union list 
or  on  previous  Union  lists.  Lithuania  currently  no 
longer  has  pending  gas  PCIs.  The  lease  contract 
for  the  floating  storage  regasification  unit  in  the 
Klaipeda  LNG  terminal  will  expire  in  2024,  with 
Lithuania  purchasing  it  before  the  end  of  this 
2024.  In  terms  of  electricity  PCIs,  Lithuania  is 
focused  on  the  synchronisation  projects  and  the 
necessary investments.   

Lithuania  has  taken  important  measures  to 
protect  households,  small  and  medium-sized 
enterprises and industries from rising energy 
prices. In May 2022, it introduced an energy bills 
support  scheme  for  households,  which  has  been 
into  the  first  half  of  2023.  The 
extended 
government  has  earmarked  EUR  530  million  of 
support  until  June  2023.  To  protect  the  smallest 
energy  consumers,  which  are  often  energy  poor 
and  vulnerable  households,  the  government  has 
postponed  the  third  stage  of  electricity  market 
liberalisation until 2026.  

Households  remain  shielded  from  steep 
energy  prices.  Measures  adopted  by 
the 
government to combat rising energy prices protect 
households.  The  support  scheme  limits  wholesale 
gas  prices  to  prevent  a  sharp  rise  in  retail  prices, 
while the retail gas price at the end of 2022 was 
65% higher than December 2021. Almost 30% of 
household  consumers  in  Lithuania  (with  annual 
consumption  below  1 000  kWh)  enjoy  regulated 
electricity  tariffs.  These  measures  address  the 
effects  of  high  prices.  However,  without 
limit  the  amount  of  energy 
mechanisms  to 

(1) On electricity, the band consumption is DC for households 
and ID for industry 
(2) On gas, the band consumption is D2 for households and I4 
for industry  
Source: Eurostat 

Lithuania has high ambitions to transform its 
energy system  and  strengthen  its  renewable 
capacity.  Further  policy  support  could 
harness  its  potential  to  make  the  economy 
net  zero.  Lithuania’s  deployment  of  renewable 
energy reached a total of 1.8 GW in 2021, up 13% 
compared to 2020. Most of this growth was down 

41 

050100150200250300350€/MWhGas LithuaniaGas EUElectricity LithuaniaElectricity EU050100150200250300€/MWhGas LithuaniaGas EUElectricity LithuaniaElectricity EU 
   
to  solar  energy  deployment,  with  a  55%  increase 
in  production  capacity  between  2020  and  2021, 
accompanied  by  a  24%  increase  in  wind  capacity 
during  the  same  period  (see  Annex  6).  Lithuania 
has also taken measures on permitting procedures 
for  renewable  energy  sources  by  shortening  the 
consultation  periods  and  creating  accelerated 
procedures  for  well-defined  cases.  There  is  still 
potential  to  further  explore  key  sectors  to  meet 
renewables  penetration  and 
the 
decarbonisation targets.  

country´s 

playing  field  among  economic  operators,  missed 
energy and CO2 savings and consumer trust 

Graph A7.3: Public R&I investment in Energy Union 
R&I priorities 

Source: JRC SETIS (2022) 

the 

require 

industries 

its  national 

institutions.  Venture  Capital 

funding  would 
country’s 

is  to  further 
Lithuania’s  strategic  goal 
integrate 
into 
European  strategic  value  chains,  so  as  to 
become  an  energy  technology  exporter  by 
research  and 
2030.  Accordingly,  Lithuania’s 
innovation  (R&I)  public  spending  in  Energy  Union 
priorities (56) rose significantly from 0,006% of the 
GDP in  2014 to  0,021% in  2020,  reaching  EUR  1 
billion.  However,  exploiting  the  full  potential  of 
increased  R&I 
the 
fragmented 
consolidation  of 
research 
(VC) 
investment in the country’s climate tech start-ups 
and  scale-ups  has  significantly  increased  in  2021 
(from  EUR  1,5  EUR  million  in  2020  to  EUR  21,2 
million  in  2021).  Within  this,  the  “energy  – 
generation  and  grids  tech”  sector  accounted  for 
92.9% 
innovation 
performance  has  remained  weak,  which  may  be 
(as 
due 
evidenced  by  the  low  share  of  public-private  co-
publications). The Recovery and Resilience Plan will 
introduce  measures  to  address  some  of  these 
weaknesses.  Declared  priority  areas  for  clean 
energy 
investment  include  biofuels,  hydrogen, 
batteries,  and  offshore  wind (57)as  well  as 
batteries, 
industry  and  hydrogen 
technologies (58).  Regarding  market  surveillance 
activities,  based  on  information  provided  through 
the  relevant  reporting  mechanisms,  Lithuania  is 
carrying  out  a  low  number  of  checks  on  products 
covered  by  eco-design  and  energy  labelling.  This 
raises concerns with respect to the enforcement of 
market 
the 
compliance levels of the concerned products, level 

in  2021.  However,  overall 

to  weak  science-business 

low  carbon 

surveillance 

obligations 

linkages 

and 

(56)  Renewables, smart system, efficient systems, sustainable 
transport, CCUS and nuclear safety, COM(2015) 80 final 
(’Energy Union Package’). 

(57)  Lithuania in-depth report, 2021, IEA. 

(58)  Lithuania National Energy and Climate Plan. 

42 

0%18%17%0%12%39%0%19%5%0%51%25%0%14%0%201020142021[% per priority]CCUSNuclear safetySustainable transportEfficient systemsSmart systemRenewables0210Total [mn Euro] 
                                                 
   
 
 
 
 
 
 
 
 
Table A7.1: Key energy indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 

Source: Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration 
based on PitchBook data (06/2022) 

43 

EU20182019202020212018201920202021Import Dependency [%] 74%75%75%73%58%61%57%56%of Solid fossil fuels 99%108%88%92%44%44%36%37%of Oil and petroleum products 98%101%103%102%95%97%97%92%of Natural Gas 99%100%99%101%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal 100%100%100%100%40%44%49%47%of Crude Oil68%79%73%80%30%27%26%25%of Natural Gas 57%43%42%37%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)4,9334,2664,1873,5113,9725,5185,079-Combustible Fuels2,7611,7501,3241,0891,2102,5502,240-Nuclear0000000-Hydro1,0241,0441,1819609481,0801,094-Wind8101,1361,3641,1441,4991,5521,362-Solar 7366688791129191-Geothermal 0000000-Other Sources265270250232223207193-Net Imports of Electricity (GWh)7,2088,2758,6779,6339,3447,9099,044-   As a % of electricity available for final consumption 71%78%79%85%82%71%76% -Electricity Interconnection (%)--88.30%80.87%86.5%77.0%81.4%69.2%20152016201720182019202020212022Gas Consumption (in bcm)2.52.22.32.32.22.42.31.6Gas Imports - by type (in bcm)3.03.63.73.34.34.54.0-Gas imports - pipeline2.62.32.52.32.72.92.4-Gas imports - LNG0.51.41.21.01.61.71.5-Gas Imports - by main source supplier (in bcm)* (1)United States0.00.00.40.00.21.21.9-Russia2.10.91.31.31.21.20.9-Norway0.92.81.82.03.02.10.5-Trinidad and Tobago0.00.00.00.00.00.00.3-Others0.00.00.20.00.00.00.4-2019202020212022LNG TerminalsNumber of LNG Terminals (2)1111LNG Storage capacity (m3 LNG)170,000170,000170,000170,000Underground StorageNumber of storage facilities0000Operational Storage Capacity (bcm)00002019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)0.21.521.1n.a.as a % of total VC investments in Lithuania0.6%0.9%5.3%n.a.Research & Innovation spending in Energy Union R&i priorites (2)Public R&I (EUR mln)10.711.39.5n.a.Public R&I (% GDP)0.022%0.023%0.017%n.a.Private R&I (EUR mln)3.3n.a.n.a.n.a.Private R&I (% GDP)0.01%n.a.n.a.n.a.CLEAN ENERGYDIVERSIFICATION OF GAS SUPPLIESLITHUANIAENERGY DEPENDENCEELECTRICITY 
 
 
 
   
 
 
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

in 

to 

the 

line 

and 

with 

This  Annex  monitors  Lithuania’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable  situations.  To  ensure  a  fair  green 
transition 
Council 
Recommendation (59) 
successfully 
implement  REPowerEU,  the  number  of  jobs  in 
Lithuania’s  green  economy  has  increased,  while 
employment  in  the  sectors  most  affected  by  the 
green 
the 
recovery  and  resilience  plan  (RRP),  a  pilot  project 
by  the  Public  Employment  Service  will  support 
entrepreneurship  and  job  creation  in  the  green 
sector (60).  The  European  Social  Fund  Plus  (ESF+) 
contributes  to  creating  new  and  better  jobs,  with 
the  green 
particular  attention 
transition and circular economy. 

remains  stable.  Under 

to  skills  for 

transition 

Graph A8.1: Fair transition challenges in Lithuania 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1).           

in  Lithuania’s  sectors  most 
Employment 
affected  by  the  green  transition  remains 
stable while the green economy is expanding, 
in  declining  activities  need 
but  workers 
active  support.  Between  2015  and  2020,  the 
greenhouse  gas  (GHG)  emissions  intensity  of 
Lithuania’s workforce increased from 14.4 to 16.5 
tonnes  per  worker,  and  is  now  above  the  EU 
average  of  13.7  in  2021  (see  Graph A8.1  and 
Table A8.1).  Employment  in  Lithuania’s  energy-
intensive industries (EII) represented 1.9% of total 
(EU  average:  3.0%). 
employment 
Employment in mining and quarrying as well as in 

in  2020 

the  manufacture  of  motor  vehicles  increased 
considerably, but was offset by reductions in other 
areas,  such  as  the  manufacture  of  basic  metals 
and other (non-metallic) products. Total jobs in the 
environmental  goods  and  services  sector  grew  by 
27.7% in 2015-2019 (EU: 8.3%), reaching 3.5% of 
total  employment  (EU:  2.2%)  (see  Annex  9  for 
circular jobs specifically). In 2022 the job vacancy 
rate  in  construction,  which  is  key  for  the  green 
transition,  was  1.9%,  compared  to  4.0%  in  the 
EU (61). 

labour  market 

industries,  workers’  participation 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  decreased  and  labour 
shortages are relatively limited. Skills are key 
to  smooth 
transitions  and 
preserving jobs in transforming sectors. In energy-
intensive 
in 
education and training fell from 10.4% in 2016 to 
8.1%  in  2022,  below  the  EU  average  (10.4%  in 
2022). Lithuania is one of the Member States with 
the  lowest  share  of  citizens  (21%)  who  believe 
they do not have the necessary skills to contribute 
to  the  green  transition  (EU:  38%) (62).  Specific 
investments  under  the  Just  Transition  Mechanism 
provide  training  to  help  reskill  workers  in  regions 
affected by the transition (more than EUR 5 million 
is  earmarked  for  this),  together  with  a  broader 
training offer under the RRP and at national level. 
The  RRP  also  aims  at  increasing  employment 
support in view of the digital and green transition, 
including up- and re-skilling programmes in fields 
such  as  the  circular  economy  and  digital  skills. 
Lithuania  committed  to  submit  ESF+  figures  for 
the funding of green skills and jobs during a later 
the  RRP, 
stage  of 
tentatively in 2025.  

implementation  of 

the 

While  energy  poverty 
indicators  have 
improved  in  recent  years,  Lithuania  remains 
among  the  worst  performers  in  the  EU  and 
the  current  spike  in  energy  prices  can  be 
expected to worsen the situation. The share of 
the  population  unable  to  keep  their  homes 
adequately  warm  fell  from  31.1%  in  2015  to 
22.5% in 2021 while the EU average in the same 
period fell from 9.6% to 6.9% (63). The same trend 
can  be  observed  for  at-risk-of-poverty  population 

(61)  Eurostat (JVS_A_RATE_R2).  

(59)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality (2022/C 243/04) covers 
employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

(60)  See also 2022 Country Report (Annex 6). 

(62)  Special Eurobarometer 527. Fairness perceptions of the 

green transition (May – June 2022). 

(63)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

44 

00.511.522.533.544.5GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestLT Latest (vs EU Latest)LT 2015 (vs EU Latest) 
 
  
                                                 
                                                 
 
Table A8.1: Key indicators for a fair transition in Lithuania 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID).      

of 

(AROP),  with  values  falling  but  remaining  well 
above the EU average (30.9% vs 16.4% in 2021). 
lower  middle-income 
However,  24.6% 
households  (income  deciles  4-5)  were  affected  in 
2021 (EU: 8.2% in 2021). Before the energy price 
hikes, an estimated 39.0% of the total population 
and  62.8%  of  the  (expenditure-based)  AROP 
population  had  residential  expenditure  budget 
shares on electricity, gas and other fuels (64) above 
10%  of  their  household  budget  (still  above  the 
estimated  EU  average  of  26.9%  and  48.2%, 
respectively).  

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

The  increased  energy  prices  in  2021-2023 
negatively  affect  households’  budgets,  in 
particular  for  low-income  groups.  As  a  result 
of energy price changes during the August 2021 to 
January  2023  period  relative  to  the  18  months 
prior (cf. Annex 7), in the absence of policy support 
share  of 
responses, 
and  behavioural 

the 

(64)  Products defined according to the European Classification of 
Individual Consumption according to Purpose (ECOICOP): 
CP045. 

by 

and 

19.1 

16.4 pps 

individuals living in households which spend more 
than  10%  of  their  budget  on  energy  would  have 
increased  by  27.0  percentage  points (pps)  for  the 
whole  population  and  by  19.9 pps  among  the 
AROP  population,  while  the  EU-level  would  have 
increased 
pps, 
respectively (65). The expenditure shares of low and 
lower-middle income groups would have increased 
the  most  in  line  with  EU-wide  patterns,  for  both 
electricity and gas, as shown in Graph A8.2. Among 
the  (expenditure-based)  AROP  population,  the 
share  of  individuals  living  in  households  with 
budget shares for private transport fuels (66) above 
6%  would  have  increased  less  than  the  EU 
average  (0.8 pps  vs  5.3 pps),  reaching  13.0%  in 
January  2023  (below  the  EU  average  of  37.1%) 
due to the increase in transport fuel prices. 

Access to public transport displays an urban-
rural  divide,  and  availability  in  particular  is 
perceived 
in  rural  areas  below  the  EU 
average.  Citizens  in  Lithuania  perceive  public 
transport to be available (58% vs 55% in the EU), 
affordable  (63%  vs  54%  in  the  EU)  and  of  good 
quality  (69%  vs  60%  in  the  EU).  In  rural  areas, 
the  EU  average  for 
perceptions  are  above 
affordability  (53%  vs  48%)  and  quality  (59%  vs 
55%),  but  below  it  for  availability  (42%  vs  46%). 
The  average  carbon  footprint  of  the  top  10%  of 
emitters among the population in Lithuania is 4.9 
times  that  of  the  bottom  50%  (see  Graph  8A.1), 
while  the  EU  average  is  5.0  times  higher.  In 
Lithuania,  the  average  levels  of  air  pollution  in 
2020  stood  below  the  EU  average  (9.8  vs  11.2 
µg/m PM2.5), with 32% of the population living in 
regions  exposed 
levels  of  air 
pollution (67), leading to significant health impacts, 

critical 

to 

(65)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

technical brief.  

(66)  ECOICOP: CP0722. 

(67)  Twice higher the recommendations in the WHO Air Quality 

Guidelines (annual exposure of 5µg/m3). 

45 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10LT GasLT ElectricityEU GasEU ElectricityIndicatorDescriptionLT 2015LT LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes14.416.5 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %1.71.9 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %8.1 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %31.122.5 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %12.213 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters54.9 (2020)5 (2020) 
   
 
                                                 
                                                 
 
  
 
in  particular  on  vulnerable  groups,  and  1 462 
premature deaths annually (68).  

(68)  EEA- Air Quality Health Risk Assessment. 

46 

 
 
 
 
 
 
                                                 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic  benefits. It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

sets an ambitious target to reach the EU average 
of circular material use rate by 2025. 

Graph A9.1: Trend in material use 

Lithuania  has  room  to  improve  the  pace  of 
its  circular  economy  transition  to  meet  the 
EU’s  circular  economy  goals.  The  EU’s  2020 
circular  economy  action  plan  (CEAP)  aims  at 
doubling  the  circular  material  use  rate  between 
2020  and  2030.  Lithuania’s  use  of  circular 
materials decreased from 4.6% in 2016 to 4% in 
2021. This rate is almost three times below the EU 
2021  average  of  11.7%.  The  CEAP  also  aims  to 
significantly  decrease  the  EU’s  material  footprint. 
In  2020,  Lithuania’s  material  footprint  (22.7 
tonnes  per  capita)  was  above  the  EU-27  average 
(13.7  tonnes  per  capita),  with  an  upward  trend 
since  2016.  The  labour  market  benefits  of  the 
circular  transition  are  more  evident  than  in  many 
other  EU  Member  States,  with  2.8%  employed  in 
direct circular jobs in 2021 (EU-27 average 2.1%). 
Lithuania 
public 
procurement reform in 2021. As a result, levels of 
green  procurement  uptake  across  Lithuanian 
public  institutions  have  increased  from  5%  of 
public  procurement  spending  by  value  in  2020  to 
in  2022.  Programme  of  Lithuania’s 
59.3% 
Government  sets  a  goal  to  make  green  public 
procurement 
type  of  public 
procurement in Lithuania from 2023.  

the  dominant 

ambitious 

launched 

an 

The guidelines for Lithuania’s transition to a 
circular  economy  until  2035  could  help 
Lithuania bring about the necessary systemic 
change  and  create  a  fertile  business 
environment  for  circular  economy  practices. 
These  guidelines  correspond  to  a  reform  included 
in  Lithuania’s  recovery  and  resilience  plan,  to  be 
adopted  in  the  first  half  of  2023.  The  guidelines 
will  focus  on  waste  prevention,  recycling,  product 
design  and  the  use  of  secondary  raw  materials, 
green  innovation,  and  legal  and  fiscal  measures 
promoting  long-term  circular  solutions.  They  will 
complement the roadmap for Lithuania’s industrial 
transition  to  a  circular  economy  developed  in 
2021.  The  national  progress  plan  for  Lithuania 

47 

Source: Eurostat 

Moving  towards  a  circular  economy  requires 
further improvements in waste management. 
With a municipal waste recycling rate of 44.3% in 
2021, Lithuania missed the EU target for recycling 
of 50% by 2020. Lithuania is at risk of missing the 
EU’s  municipal  waste  recycling  target  for  2025. 
The  landfilling  rate  in  2021  was  16%,  below  the 
EU average. Lithuania will need to make efforts to 
meet  the  EU  recycling  targets  by  2035  through 
improvements 
and 
in 
treatment of waste.  

collection 

separate 

transition 

The industrial system is yet to transition to a 
circular  model.  The  economy,  particularly 
industry,  is  considerably  less  efficient  at  using 
materials to produce wealth than the EU average, 
with  a  resource  productivity  of  1.4  purchasing 
power  parity  standard  per  kilogramme  vs  2.3  for 
the EU (see Annex 5). The roadmap for Lithuania’s 
industrial 
to  a  circular  economy 
concludes that the transition is in its initial stages 
and  suggests  focusing  not  only  on  strategic 
industrial  sectors,  but  also  on  other  sectors  with 
high  potential  for  circular  innovations  such  as 
textiles,  construction,  furniture,  packaging  and 
plastics,  food  and  waste.  The  roadmap  identifies 
the  main  challenges  for  Lithuanian  industry  as 
being  the  creation  of  greater  added  value, 
into  European  value  chains  and 
integration 
cooperation  between 
the  public  sector  and 
businesses.  Lithuania  is  encouraged  to  create 

0.050.0100.0150.0200.0250.00.05.010.015.020.025.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Lithuania (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Lithuania (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita) 
 
 
            
 
more  business  accelerators  and  incubators  for 
industrial start-ups and development. 

Graph A9.2: Treatment of municipal waste 

Additional  investments  will  be  required  to 
address  growing  needs.  The  financing  gap  was 
estimated  at  EUR  64  million  per  year  between 
2014  and  2020.  Over  this  period,  investment 
needs  were  estimated  to  be  at  least  EUR  213 
million  per  year,  while  investment  baselines  were 
EUR  149  million  per  year 
(see  Annex  6). 
Investment areas such as eco-design, repair, reuse 
and remanufacturing as well as the uptake of new 
business  models  will  be  necessary  to  reach  the 
EU’s  circular  economy  objectives.  Lithuania  is 
already  using  funds  from  the  ERDF  and  the 
investments  are 
Cohesion  Fund,  but  further 
needed. 

Source: Eurostat 

The  built  environment  system  depletes 
resources  less  than  the  EU  average.  The 
recovery rate of construction and demolition waste 
in  Lithuania  has  increased  since  2016  and  is 
above the EU average (98% vs 89%). Soil sealing 
progressed  between  2016  and  2018  but  is  still 
slightly  below  the  EU  average.  The  remaining 
challenges  are  related to the  energy efficiency  of 
buildings and the adoption of circular principles to 
the built environment. 

The  agri-food  system  has  yet  to  design  out 
food  waste  and  improve  composting  and 
digestion.  Lithuania’s  composting  and  anaerobic 
digestion  per  capita  increased  up  to  2018  and 
then slid back to 86 kg per capita in 2021, below 
the  EU  average  of  100  kg  per  capita.  While  the 
implementation of a national separate food waste 
collection  system  is  in  progress,  speeding  it  up 
could have beneficial effects in terms of recycling 
targets.  Compost  and  digestate  from  biowaste 
land 
treatment  plants 
improvement  and  fertiliser  uses.  There  remains 
scope  to  use  more  efficient  farming  techniques 
and  spread  good  practices  to  enable  the  shift 
towards circularity.  

can  be  used 

for 

There remains a financing gap in the circular 
including  waste  management.  
economy, 

48 

4444554644724834800100200300400500600201620172018201920202021Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27 
           
Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the 
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material 
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes 
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households.  
Source: Eurostat, European Environment Agency 

49 

AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)18.020.220.220.922.7-13.72020YoY growth in persons employed in the circular economy (%)1-1.13.0-1.5--2.92019Water exploitation index plus (WEI+) (%)0.50.30.60.7--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)1.41.31.41.41.31.42.32021Circular material use rate (%)24.64.54.33.94.04.011.72021Recycling rate (% of municipal waste)48.048.152.649.745.344.349.62021Built environmentRecovery rate from construction and demolition waste (%)397.0-99.0-98.0-89.02020Soil sealing index (base year = 2006)4102.9-107.8---108.32018Agri-foodFood waste (kg per capita)5----137.0-131.02020Composting and digestion (kg per capita)104.0109.0131.0105.0100.086.0100.02021 
 
  
 
proportion of people with at least basic and above 
basic digital skills (49% vs 54% and 23% vs 26%).  
Lithuania  has  a  higher-than-average  percentage 
of  female  ICT  specialists,  but  the  scarcity  of  ICT 
specialists overall remains a key challenge. 

The  country  could  further  improve  on digital 
infrastructure/connectivity,  where  broader 
network  coverage  could  enable  wider  use  of 
digital technologies. Very high capacity network 
(VHCN)  coverage  is  higher  than  the  EU  average 
(78% vs. 73%), as is the overall 5G coverage (90% 
vs  the  EU  average  of  81%).  But  5G  coverage  on 
the 3.4-3.8 GHz spectrum band, which is essential 
for enabling advanced applications requiring large 
spectrum bandwidth, is 36%, slightly below the EU 
average  of  41%.  However,  this  may  change  soon 
as  5G-dedicated  spectrum  bands  have  been 
auctioned in 2022 and the related investments are 
ongoing. 

Lithuania’s performance on the digitalisation 
of  businesses 
is  mixed;  the  uptake  of 
advanced  technologies  by  SMEs  remains  a 
key  challenge.  The  share  of  small  and medium-
sized  enterprises  with  at 
least  basic  digital 
intensity  is  below  the  EU  average.  The  use  of 
advanced  technologies  like  artificial  intelligence, 
big  data  and  cloud  computing  services  is  also 
lower than the EU average.   

Lithuania  performs  well  on  digital  public 
services.  It  is  most  notable  in  the  availability  of 
digital  public  services  for  businesses,  where  it 
performs  comfortably  above  the  EU  average.  In 
the  provision  of  digital  services  for  citizens,  its 
performance is slightly lower, although still above 
the EU average. In the access to electronic health 
records,  it  scores  91  out  of  100,  considerably 
above  the  EU  average.  The  country  has  one 
electronic 
(eID)  scheme  notified 
under 
the  eIDAS  Regulation.  A  considerable 
proportion of the Lithuanian digital RRP measures 
including 
will  be  focused  on  public  services 
measures to support the digital transformation of 
healthcare  and  implement  a  government  cloud 
infrastructure  and  projects  that  aim  to  increase 
interactivity for end users and increase the use of 
advanced 
artificial 
technologies 
intelligence in digital public services.  

identification 

such 

as 

ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes Lithuania’s performance on digital skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  Lithuania  allocates  32%  of  its  total  RRP 
budget to digital (EUR 0.7 billion) (69). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (70).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (71). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (72). 

The  lack  of  information  and  communication 
technology  (ICT)  specialists  remains  a  key 
challenge  for  Lithuania.  In  digital  skills,  the 
country  scores  below  the  EU  average  for  the 

(69)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(70)  The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(71)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(72)  The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552). 

50 

 
 
                                                 
 
Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.   

Source: Digital Economy and Society Index 

51 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA49%49%54%80%% individuals2021202120212030ICT specialists (1)3.3%3.8%3.8%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage67%78%78%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)67%78%78%56%-% households20202021202220222030Overall 5G coverage0%33%90%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA36%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA64%69%90%% SMEs202220222030Big data (3)11%11%11%14%75%% enterprises20202020202020202030Cloud (3)NA28%28%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA5%5%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA828477100Score (0 to 100)2021202220222030Digital public services for businessesNA939484100Score (0 to 100)2021202220222030Access to e-health recordsNANA9171100Score (0 to 100)202320232030Lithuania 
 
 
  
 
 
 
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
and 
performance 
innovation system, which is essential for delivering 
the twin green and digital transition. 

Lithuania’s 

research 

of 

Lithuania is a ‘moderate innovator’ but it has 
steadily  improved  its  performance  over  the 
last decade. According to the 2022 edition of the 
European Innovation Scoreboard (EIS) (73), the gap 
between  its  performance  and  the  EU  average  is 
narrowing,  thanks  to  increases  in  venture  capital 
and  non-R&D  innovation  expenditure.  However, 
human  resources  continue  to  lag  behind,  the 
number of foreign doctorate students has declined 
and  R&D  expenditure  in  the  public  sector  has  not 
improved. 

R&D  intensity (74)  has  fluctuated  over  the 
years and reached 1.11% of GDP in 2021. It is 
less than half of the EU average and is well below 
the government’s target of 1.5% of GDP for 2024. 
Public  expenditure  on  R&D  has  stagnated  for  the 
last  6 years  at  0.56%  of  GDP  in  2021,  the  same 
investment  level  as  in  2007 (75).  In  2021,  despite 
some  significant  progress  in  past  years,  private 
R&D  expenditure  reached 0.54%  of  GDP,  still  just 
over a third of the EU average (1.49% of GDP). 

Graph A11.1: Public R&D intensity 2010-2021 

Source: Eurostat 2023 

Insufficient  public  funding,  a  fragmented 
research and innovation (R&I) landscape and 

(73)  2022 European Innovation Scoreboard (EIS), Country profile, 

Lithuania: 
https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-country-
profile-lt.pdf. The EIS provides a comparative analysis of 
innovation performance in EU countries, including the relative 
strengths and weaknesses of their national innovation 
systems (also compared to the EU average). 

(74)  defined as gross domestic expenditure on R&D as a 

percentage of GDP. 

unattractive  research  careers  have  led  to 
below  the  EU  average  science  results.  The 
public investment in R&D is low and dispersed, and 
not  used  effectively,  due  to  a  still  fragmented 
community  of  research  institutions.  Over  the  last 
decade researchers have had low productivity and 
scientific  excellence,  as  evidenced  by  the  number 
of  top-quality  publications,  which  is below  the  EU 
average  but  increasing (76).  The  number  of  new 
graduates 
is 
decreasing, as is the number of foreign doctorate 
students. International ties with excellent research 
institutions are limited. 

science  and  engineering 

in 

The  Lithuanian  recovery  and  resilience  plan 
(RRP)  has  introduced  measures  to  address 
the  fragmentation  of  the  research  system 
and  raise  public  R&D  funding.  The  measures 
encompass the whole knowledge production chain 
–  from  raising  the  quality  of  higher  education  to 
ensuring  new  frontier  research.  The  situation  is 
expected to improve with the introduction of a new 
funding  structure  with  a  stronger  R&D  focus, 
coupled  with  newly  defined  missions  for  higher 
education  institutions  (HEIs)  and  incentives  for 
reorganisation  and  mergers  amongst  HEIs. 
Furthermore,  the  RRP  will  fund  scholarships  for 
foreign  students  and  support  the  design  of  three 
joint science and innovation missions based on the 
smart specialisation strategy and implemented by 
three  new  excellence  centres.  The  country  so  far 
the 
has  no 
sustainability of increased R&I investment beyond 
the RRP. 

credible  plans 

for  ensuring 

Innovation by Lithuanian businesses is slowly 
progressing,  but  science-business  linkages 
remain  weak.  The  country  performs  poorly  in 
terms of technology development, reflected by the 
low  and  stagnant  number  of  patents (77),  and 
structural  change  towards  higher-tech  activities. 
The  proportion  of manufacturing  firms  classed  as 
high-  and  medium-high-tech  has  diminished 
slightly  over  the  last  decade  and  most  value 
added 
low-  and  medium-tech 
companies.  At  the  same  time,  Lithuania  has  a 
booming  and  successful  start-ups  ecosystem. 
Innovative businesses collaborate mainly with one 
research 
another,  and 

less  so  with  public 

is  created  by 

(76)  Lithuanian top 10% most cited scientific publications 

worldwide equal to 5.6% and EU average to 9.9% in 2019, 
(source: Eurostat). 

(77)  0.6 patent applications filed under PCT per billion GDP (in 

(75)  0.57% of GDP in 2007 (source: Eurostat). 

PPS) in both 2008 and 2019. 

52 

0.40.50.60.70.820102015201620172018201920202021as % of GDPEULT 
 
  
                                                 
                                                 
 
Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

institutions (78),  except  in  the  usual  niches  of  life 
sciences or lasers. 

to 

It  aims 

incentives 

The Lithuanian RRP has introduced measures 
to  strengthen  public-private  linkages  and 
innovation  demand. 
improve 
innovation  and  science-business  linkages  through: 
financial 
public 
for 
procurement  to  boost  demand  for  innovation; 
acceleration  services  to  support  the  start-up 
ecosystem;  the  creation  of  three  specialised 
knowledge-transfer  Industry  4.0  Labs  to  develop 
green  products  and  technologies;  and  the  three 
joint  missions 
innovation 
mentioned above. 

for  science  and 

innovative 

Measures  to  improve  the  governance  of  the 
R&I  system  and  address  fragmentation  are 
underway.  Historically,  R&I  governance  was 
spread  across  several  agencies,  resulting  in  an 
uncoordinated  policy  mix.  Under  the  RRP,  a  new 
unifying Innovation Agency has been created. This 
Agency  will  need  to  have the  autonomy  of  action 
to establish its operational model, to ensure tailor-
for 
made 
businesses (79).  The  Research  Council  of  Lithuania 
will  serve  as  a  one-stop  shop  for  science.  Finally, 
the  implementation  of  a  coherent  policy  mix  is 
underway,  as  well  as  the  introduction  of  science 
and  innovation  officers  in  all  ministries  aimed  at 
ensuring  a  cross-cutting  and  coordinated  science 
and  innovation  policy  approach  throughout  the 
government. 

investments  and 

tape 

low 

red 

(78)  Public-private scientific co-publications as percentage of 

total number of publications increased very slightly over the 
decade and still lags behind the majority of the EU countries. 

(79)  Policy Support Facility report Lithuania ‘Fit for Future’ (2016) 

SS%20Lithuania_Final%20Report.pdf (europa.eu). 

53 

R&D intensity (GERD as % of GDP)0.781.040.991.161.112.26Public expenditure on R&D as % of GDP0.550.760.560.60.560.76Business enterprise expenditure on R&D (BERD) as % of GDP0.230.290.430.560.541.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 2.84.45.6::9.8Patent Cooperation Treaty patent applications per billion GDP (in PPS)0.40.40.6::3.3Public-private scientific co-publications as % of total publications5.24.67.15.75.27.1Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0820.0910.041::0.054New graduates in science & engineering per thousand pop. aged 25-3423.318.415.9::16Total public sector support for BERD as % of GDP0.0680.0830.126::0.194R&D tax incentives: foregone revenues as % of GDP0.0130.0210.026::0.1Share of environment-related patents in total patent applications filed under Patent Cooperation Treaty (%)36.1193.7 : :13,3Venture capital (market statistics) as % of GDP0.00030.0260.0080.0120.040.074Employment in fast-growing enterprises in 50% most innovative sectors4.52.14.1::5.52019EU average (1)2021Finance for innovation and economic renewal2020Lithuania20102015Key indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation  
                                                 
                                                 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

by 

showed 

recurring 

European 

relatively 

to  economic  growth, 

Lithuania 
strong 
investment  growth  in  recent  years,  which  is 
now  dampened  by  recent  cost  increases  and 
declining  business  confidence.  In  recent  years, 
public  investment  has  been  directed  mainly  to 
digital  and  green  infrastructure,  energy  security, 
is  mainly 
healthcare  and  R&I  projects.  This 
supported 
funding 
programmes.  Although  private  investment  has 
been  contributing 
the 
Lithuanian Productivity Board draws attention to a 
rather  low  rate  of  investment  per  employee  in 
Lithuania,  which  ranks  only  22  out  of  27  EU 
Member States in 2020 (80). This contributes to the 
relatively  low  labour  productivity,  where  Lithuania 
only reaches 73% of the EU (in purchasing power 
investor  and 
parity 
consumer  confidence,  mainly  due  to  the  Russian 
invasion  of  Ukraine,  high  inflation,  supply  chain 
disruptions  and  high  prices  for  energy  raw 
materials  weigh  on  households’  real  disposable 
income, corporate profitability and thus on private 
investment.  

standards).  Decreasing 

shortages  and  uncertainty  are 
Skills 
hampering 
job  creation 
investment.  While 
continued  and  unemployment  fell  continuously 
despite  the  COVID  crisis,  labour  market  tightness, 
measured  as  the  ratio  of  job  vacancies  to  the 
unemployed,  was  at  its  highest  in  15  years (81), 
although  declining  end  of  2022.  This  points  to 
skills  mismatches  and  skills  shortages,  which  are 
of great concern for Lithuanian firms according to 
the 2022 EIB investment survey (79% of surveyed 
firms), especially in the construction sector (ECFIN 
Business and Consumer survey). In autumn 2022, 
short-term  uncertainty  indicators  reached  their 
highest  levels  since  2000,  similar  to  Latvia  and 
Estonia. 
export-oriented 
in 
manufacturing,  construction  and  services  sectors, 
uncertainty is increasing, while expectations in the 
retail  trade  sector  are  rather  positive.  Investment 
in  construction  (civil  engineering  buildings  and 
structures)  and  transport  equipment  declined 
already  at  the  end  of  2022,  while  investment  in 
energy-saving  projects  (category:  other  capital 
goods) and residential construction by households 
continued growing. 

Especially 

the 

of  SMEs 

experiencing 

Although the general availability of financing 
and  well-functioning  financial  markets  are 
favourable  for  firms,  access  to  finance  and 
late  payments  remain  the  main  problems 
especially  for  SMEs.  Firms’  financial  liabilities 
increased  substantially  in  2022 (82),  mainly  by 
using  trade  credit  financing,  due  to  deferred 
settlements.  This  is  also  illustrated  by  the  large 
late 
(50%) 
share 
payments (83).  In  addition,  firms’  financial  assets 
declined because (i) firms tried to refill their stocks 
of  imported  raw  materials  and  products,  which 
was more expensive due to overall price increases 
and  (ii)  pandemic  support  measures  from  the 
government  ended.  According  to  the  SAFE  survey, 
for 15% of Lithuanian SMEs (7% in the EU) access 
to  finance  is  one  of  the  main  problems,  which 
reduces 
and 
investment.  This  is  specifically  relevant  for  young 
in  Lithuania (84).  The 
and  expanding 
development  of  the  fintech  sector  and the  use  of 
venture 
private 
management,  has  further potential,  particularly  in 
targeting start-ups in their later life cycle (85). The 
ratio of financially constrained firms in Lithuania is 
one  of  the  highest  in  the  EU (86).  Additionally,  a 
large share of SMEs (34% in Lithuania vs. 24% in 
EU) are relying on relatively expensive bank credit 
or credit overdraft.  

improvements 

productivity 

especially 

capital, 

firms 

via 

Productivity is improving in tradable sectors, 
secured  by  growing  export  market  shares, 
albeit  in  somewhat  medium-low  technology 
products  and  services.  Productivity  growth  in 
tradable sectors, specifically in manufacturing (see 
graph A12.1), has increased above the EU average. 
This  helped  to  steadily  increase  world  export 
market 
and 
food/agriculture  products)  and  services  (transport 
services)  over  the  last  decade.  The  strong  wage 
growth,  even  in  the  non-tradeable  sectors,  was 
broadly 
line  with  productivity  advances, 
resulting in broadly constant real unit labour costs. 
However,  with  continuing  wage  pressure  due  to 
labour shortages, combined with increasing energy 

(chemical 

shares 

goods 

in 

in 

(82)  Central Bank of Lithuania (2023). Lithuanian Economic 

Review, March 2023. 

(83)  SAFE Survey (2022). 

(80)  National Productivity Board Lithuania (2022). Assessment of 
labour productivity developments in Lithuania. Investment 
and labour productivity in the EU. Annual Report. 

(81)  Central Bank of Lithuania (2022). Lithuanian Economic 

Review, September 2022. 

(84)  Foda, K., Shi, Y., and M. Vaziri (2022): Financial Constraints, 
productivity, and investment, evidence from Lithuania, IMF 
WP/22/249. 

(85)  OECD (2022). Economic surveys : Lithuania, October 2022. 

(86)  EIB (2022) Investment survey. 

54 

 
 
                                                 
                                                 
 
 
prices,  rising  unit  labour  costs  endanger  the 
competitive position of Lithuanian firms. This could 
be  improved  by  advances  in  innovation  and 
investment.  The  relatively  low  productivity  level 
attained  is  due  to  the  structure  of  the  economy, 
which  is  concentrated  in  less  knowledge-intensive 
activities (87).  Despite  this,  Lithuania  succeeded  in 
increasing 
and 
medium-tech  exports,  albeit  from  a  rather  low 
starting 
level (OECD  2022).  Additionally,  R&D 
business expenditure as a share of GDP grew from 
0.23% in 2010 to 0.55% in 2021), with the current 
level  still  far  below  the  EU  average  of  1.5%  (see 
Graph A12.2 and Annex 11) (88). 

high/medium-high-tech 

its 

Graph A12.1: Labour productivity per sector 

Source: European Commission. 

remain. 

barriers 

Although  the  Lithuanian  economy  is  well 
integrated  into  the  single  market,  with  a 
trade  integration  of  58.6%  of  GDP,  some 
Regulatory 
regulatory 
restrictiveness  in  Lithuania  is  higher  than  the  EU 
average  for  architects,  civil  engineers,  patent 
agents  and  tourist  guides.  Among  the professions 
analysed, restrictiveness is the highest for lawyers 
(“advokatas”)  and  architects. (89)  Recent  reforms 
facilitated  the  use  of  legal  services  and  land 
acquisition for non-residents. Licensing procedures 
in services such as healthcare are gradually being 
eliminated,  to  reduce  compliance  costs.  Lithuania 
still  faces  some  challenges  related  to  the  public 
procurement  market  and  its  lack  of  competition. 
The  percentage  of  single  bids  has  increased 

(87)  European Commission (2022). SME country fact sheet for 

Lithuania. https://ec.europa.eu/docsroom/documents/50695. 

(88)  Eurostat, RD_E_BERDPFR2. 

(89)  European Commission (2021). Communication on updating 
the reform recommendations for regulation in professional 
services, COM(2021)385. 9/7/2021). 

significantly in the last two years (28% in 2020 to 
34% in 2022). Moreover, the number of contracts 
awarded based on the lowest price remains above 
the  EEA  average  at  93%.  However,  according  to 
the  OECD  (2022),  reducing  and  reforming  state-
owned  enterprises  in  several  sectors  (network 
industries,  but  also  agriculture,  forestry  and 
financial  services),  especially  at  municipal  level, 
could increase GDP per capita by up to 5%. 

Graph A12.2: Business environment and 
productivity drivers 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

in 

carbon 

Lithuania’s  ambitious 
emission 
targets  set  in  2021  require  a  shift  in  the 
energy  mix  and 
therefore  substantial 
renewables,  which  also 
investment 
supports  the  energy  security.  Although  carbon 
emissions  per  capita  are  below  the  EU  average 
(5.4 kt CO2 equivalents in Lithuania versus 7 kt in 
the EU as a whole) (90), the transport, industry and 
agricultural  sectors  are  contributing  to  a  steady 
increase 
in  emissions.  Lithuania  has  started 
implementing  measures  to  increase  its  share  of 
renewables  and  other  non-hydrocarbon  energy. 
Within  the  Single  Market  Enforcement  Taskforce 
(SMET)  initiative  for  streamlining  the  permitting 
procedures  for  wind  and  solar  energy  projects, 

(90)  European Environment Agency (EEA) greenhouse gases – 

data viewer (latest data from 2020).  

55 

6080100120140160180200220240260280300030507091113151719212003=100Market services (G_N)Manufacturing (C)Construction (F)Tradable (A_E, G_J)Non tradable (F, K_U)1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionLithuania 
     
                                                 
   
                                                 
Lithuania committed to simplify rules on land use 
and  land  repurposing  and  proposed  to  shorten 
burdensome administrative procedures and clarify 
necessary requirements. The package of legislative 
amendments  has  been  adopted  and  came  into 
force in July 2022. The successful implementation 
and  the  real  impact  on  renewables  capacities  will 
be closely monitored. 

Table A12.1: Industry and the Single Market 

(*) Last available year 
Source: (1) AMECO, (2) Eurostat, (3) ECFIN BCS, (4) Eurostat, (5) COMEXT and Commission calculations, (6) Eurostat, (7) Eurostat, 
(8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: (12) Intrum, (13) SAFE Survey, (14) EIF SME Access to 
Finance Index. 

56 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)7.98.46.58.783.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)0.60.51.80.70.90.4Real labour productivity per person in industry (% yoy)(2)-1.44.72.85.36.51.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)6.16.403.46.62.9Material shortage (industry), firms facing constraints, % (3)1099212747Labour shortage using survey data (industry), firms facing constraints, % (3)181612222628Vacancy rate (business economy)(4)1.51.41.321.93.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.210.20.20.20.170.18Installed renewables electricity capacity, % of total electricity produced (6)48.548.949.352.6n.a.50.9Single market integrationEU trade integration, % (7)47.147.645.451.558.645.8RestrictionsEEA Services trade restrictiveness Index (8)0.030.030.030.030.030.05Public procurement Single bids, % of total contractors (9)242828303429Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)22.624.521.122.422.629.6Bankruptcies, index (2015=100)(11)107.378.140.838.353.986.8Business registrations, index (2015=100) (11)116123.4131.2144.8138.9121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)3216121213Payment gap - public sector, difference in days between offered and actual payment (12)4-117111815Share of SMEs experiencing late payments in past 6 months, % (13)n.a.5552.252.850.643EIF Access to finance index - loan, composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.550.540.650.34n.a.0.46EIF Access to finance index - equity, composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.130.130.250.54n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic structureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
     
 
ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
Lithuania’s  public  administration,  which  is 
essential for providing services and carrying 
out  reforms.  The  effectiveness  of  public 
administration in Lithuania remains around the EU 
average. (91)  Lithuania’s  recovery  and  resilience 
plan  (RRP)  envisages  significant  investments  in 
customer-oriented  services  and  the  management 
of  data  and  digital  services  for  the  public.  Other 
measures  aim  to  improve  civil  servants’  skills  in 
developing and managing policies. The 2022-2030 
public  governance  development  programme 
contains more initiatives to improve the quality of 
interaction  between 
regional  and 
the 
national administrations.  

local, 

Lithuania  performs  well  above  the  EU 
average 
in  e-government.  The  share  of 
individuals  who  interact  with  public  authorities 
online has grown steadily over the past few years. 
Under  the  recovery  and  resilience  plan,  Lithuania 
has  created  a  competence  centre  for  open  data 
and  digital  transformation,  which  aims  to  provide 
ex  ante  assessments  of  digital  solutions.  This  is 
expected  to  reduce  duplication  and  promote  ease 
of  use,  affordability  and  higher  standards  for  the 
proposed 
Furthermore, 
Lithuania  has  launched  an  overhaul  of  the  data 
management, in line with its RRP commitments.   

technologies. 

digital 

further  progress 

Regulatory  governance  in  Lithuania  is  well-
is 
established  while 
foreseen  when  ensuring  quality  control. 
Impact  assessments  and  public  consultations  are 
done  systematically 
for  both  primary  and 
secondary  legislation (92).  The  country  has  been 
working  to  further  develop 
its  capacities  to 
improve  the  quality  of  impact  assessments  and 
evaluations,  strategic  planning,  and  the  use  of 
evidence (93)  and  foresight (94)  in  policymaking. 
Through  a  multiannual 
the 
government aims to promote all these methods to 

legislative  plan, 

(91)  Worldwide Governance Indicators, 2021. 

(92)  OECD, Indicators of Regulatory Policy and Governance 2021, 

Lithuania (https://www.oecd.org/gov/regulatory-
policy/lithuania-country-profile-regulatory-policy-2021.pdf). 

improve 
legislation.   

the  quality  and  predictability  of 

the 

that 

their 

challenges 

Lithuania  has  a  comparatively  young  and 
skilled  civil  service  but  it  faces  problems 
attracting talent. The ratio of 25-49- to 50-64-
year-old  employees,  the  share  of  civil  servants 
with  higher  education,  and 
rate  of 
participation  in  adult  learning,  are  above  the  EU 
average  (Table  A13.1).  However,  the  declining 
share  of  employees  with  higher  education 
illustrates 
the  public 
administration  faces  in  attracting  talent.  Gender 
parity in senior civil  service positions is in the top 
third of EU Member States but has worsened since 
2017. 
service 
of 
transformation  reform,  partly  supported  by  the 
RRP, (95)  aims 
the  efficiency, 
competitiveness  and  the  attractivity  of  public 
sector employment. The proposed amendments in 
the  Civil  Service  Code  include  simplification  of 
procedures  to  select  and  appoint  heads  of 
institutions and change the rules for compensation 
of  civil  servants (96).  This  will  align  the  regulation 
of  the  civil  service  to  the  Labour  Code  and  is 
expected  to help attract more talented managers. 
Furthermore, 
the 
establishment of a Public Administration Agency. 

envisages 

improve 

reform 

launch 

civil 

The 

the 

the 

to 

in 

Lithuania is above average in public financial 
management,  scoring  in  line  with,  or  above,  EU 
the  Commission  medium-term 
averages 
budgetary  framework  index  and  the  indicator  on 
the strength of fiscal rules (Table A13.1). However, 
there  remain  challenges  with  respect  to  public 
procurement  systems,  related  to the high  number 
of  awards  with  a  single  bidder,  low  levels  of 
centralised  procurement  and  reliance  on  price 
criteria  for  making  award  decisions  (see  Annex 
country-specific 
12). 
to 
recommendation  1  of 
the  2022  European 
Semester  report,  Lithuania  aims  to  introduce 
reforms  to  promote  the  centralisation  of  public 
procurement  and  the  professionalisation  of  staff. 
Lithuania will introduce a new public procurement 
platform and annual assessments of procurement 
practices, with the aim of spotting and addressing 

response 

In 

(93)  Chancellery of the Government of the Republic of 
Lithuania (https://lrvk.lrv.lt/lt/apie-vyriausybes-
kanceliarija/lrvk-projektu-portfelis/igyvendinami-
projektai/strata-projektas).  

(95)  Public Management Development Programme 2022-2030, 

Ministry of Interior (https://www.e-
tar.lt/portal/lt/legalAct/9ba13c90a4f911ec8d9390588bf2de
65). 

(94)  Chancellery of the Government of the Republic of Lithuania, 
Lithuania 2050 (https://lrvk.lrv.lt/lt/naujienos/lietuva-2050-
apibrezti-keturi-galimi-salies-scenarijai-ekspertai-juos-gilins-
teminese-diskusijose). 

(96)  Lithuanian Republic Government Report: 2022 03 30 (p. 25-

27). 
https://lrv.lt/uploads/main/documents/files/Vyriausybes%202
021%20m_%20veiklos%20ataskaita(2)(1).pdf) 

57 

 
 
                                                 
                                                 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. (4) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions. 
Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10). 

weaknesses.  Lithuania 
is  centralising  public 
procurement  above  15  000  euro  of  institutions 
under  municipalities  from  2023  and  plans  in 
several phases to centralise public procurement of 
health  institutions  at  government  level  by  2026 
(about 40 contracting authorities). Additionally, the 
central  purchasing  body  CPO  LT  is  significantly 
expanding the range of goods, services and works 
it  offers  for  purchase  through  the  use  of  the 
framework  agreements  it  has  developed  and 
dynamic purchasing systems. In 2022, the value of 
contracts concluded via CPO LT reached 13.4% of 
total public procurement spending by value.   

The 
justice  system  performs  efficiently, 
although  new  challenges  are  emerging.  In 
2020, the time it took to hand down a decision in 
first  instance  increased  in  civil,  commercial  and 
administrative  cases.  While  the  case  backlog 
remains comparatively small, progress in reducing 
backlogs  has  been  interrupted,  with  more  cases 
entering the  system  than those  resolved in  2020, 
in all the categories looked at. The overall quality 
of  the  justice  system  is  good.  However,  there  are 
concerns  regarding  the  level  of  financial  and 

human resources of the justice system. The use of 
digital tools is very advanced, and procedural rules 
allow the use of digital technology in courts in civil, 
commercial,  administrative  and  criminal  cases. 
New  rules  have  been  adopted  on  the  use  of 
in  criminal,  civil  and 
videoconferencing  tools 
administrative  cases,  to  ensure  that  hearings  are 
open 
judicial 
independence, no systemic deficiencies have been 
reported (97). 

the  public.  As 

regards 

to 

(97)  For a more detailed analysis of the performance of the 
justice system in Lithuania, see the 2023 EU Justice 
Scoreboard (forthcoming) and the country chapter for 
Lithuania in the 2023 Rule of Law Report (forthcoming). 

58 

LT201720182019202020212022EU-27(2)161.763.166.568.970.4n/a64.82n/an/an/a80.783.485.172.93n/a0.50.50.90.90.90.8478.477.079.379.977.2 (b)75.152.0512.214.214.412.417.2 (b)17.716.961.05.60.82.44.47.411.071.91.71.92.12.0 (b)1.71.580.70.70.70.80.8n/a0.792.22.72.72.72.7n/a1.5101.77n/an/an/a1.85n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance 
   
                                                 
 
   
 
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU. This Annex provides an overview of Lithuania’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

Table A14.1: Social Scoreboard for Lithuania 

also 

unemployment 

record  high  of  79.0%  in  2022,  well  above the  EU 
average (74.6%). The unemployment rate dropped 
to  6.0%  in  2022,  below  the  EU  average  of  6.2%. 
Long-term 
decreased 
significantly,  reaching  2.3%  in  2022  (EU:  2.4%), 
but still higher than pre-COVID-19 levels of 2% in 
Q3-2019.  The  active  labour  market  policy  (ALMP) 
system suffers from low capacity and investment 
and relies heavily on EU funding. This results in a 
fragmented  implementation  of  policies,  a  limited 
range  of  measures  and  a  lack  of  outreach  to 
certain  groups  of  unemployed  people.  As  part  of 
its  recovery  and  resilience  plan  (RRP),  Lithuania 
introduced  in  July  2022  a  reform  to  improve  the 
integration  of  unemployed  people  into  the  labour 
market. The reform includes profiling (according to 
their  preparedness  to  work)  and  targeted  labour 
market  measures.  Together  with  other  RRP 
measures  and  more  than  EUR 250  million  of 
European  Social  Funding  Plus  (ESF+)  financing 
focused on tailored ALMP measures, these efforts 
will further support progress towards the national 
employment rate target of 80.7% by 2030. 

The  fall-out  of  Russia’s  war  of  aggression 
against  Ukraine  may  hamper  the  labour 
market’s  recovery.  About  half  of  the  working-
age  Ukrainians  that  fled  to  Lithuania  had  found 
employment  by  October  2022.  However,  there  is 
uncertainty  if  such  a  rate  can  be  maintained. 
Furthermore,  this  did  not  stop  the  unemployment 
rate of low-skilled people rising from 14.9% in Q1-
in  Q4-2022  (vs.  EU:  6.5% 
2022  to  15.5% 
respectively). Finally, many companies in Lithuania 
have  urged  the  government  to  take  measures  to 
cushion the unprecedented surge in energy prices, 
signalling  possible  mass  redundancies  or  even 
bankruptcies.  The  government 
responded  by 
adopting  a  package  of  support  measures  for 
businesses (see Annex 8). 

in 

Labour shortages continue to pose problems, 
exacerbated  by  skills  mismatches.  In  Q3-
2022,  more  than  20%  of  employers  reported 
the  manufacturing  and 
labour  shortages 
construction  sectors,  and  more  than  30%  in  the 
services  sector,  the  latter  having  diminished  to 
24%  in  Q4-2022.  Some  of  the  main  drivers  of 
labour shortages and skills mismatches are: (i) an 
insufficient 
labour  market  relevance  of  and 
relatively  low  enrolments  in  vocational  education 
and training (see Annex 15); (ii) fragmented career 

(1) Update of 27 April 2023. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2023. Due to changes in the 
definition of the individuals' level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: Eurostat. 

Despite  the  current  unstable  economic 
environment,  the  labour  market  in  Lithuania 
continued to make a robust recovery in 2022 
as  shown  by  growing  employment  and  low 
unemployment rates. Following the phasing out 
of the COVID-19-related short-time work schemes 
in  Q3-2021,  the  employment  rate  reached  a 

59 

4.848.8410.70.86.147962.3143.123.521.635.2823.92.721.42.4Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic labour markets and fair working conditionsEmployment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022)Long term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Social protection and inclusionAt risk of poverty or social exclusion rate                                            (% of total population, 2021)At risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Impact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Disability employment gap(percentage points, 2021)Housing cost overburden(% of total population, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Better than averageBest performersPolicy areaHeadline indicatorEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2022)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021) 
 
 
 
  
 
 
guidance and adult learning systems; and (iii)  low 
adult learning levels. Participation of adults (aged 
25-64) in learning activities over the past 4 weeks 
stood  at  8.5%  in  2021  (vs  EU:  10.8%)  and  was 
especially  low  among  low-qualified  people  (2.7% 
vs.  EU:  4.3%).  In  2021,  the  share  of  individuals 
who have basic or above basic overall digital skills 
was  48.8%  (vs.  EU:  53.9%),  thus  hindering  the 
country’s  digital  transition.  To  address  this,  the 
Lithuanian RRP provides for the creation of a one-
stop-shop  model  for  lifelong  learning  based  on 
individual  learning  accounts  in  2023,  and  the 
reform  of  the  career  guidance  introducing  it  in 
schools.  This  will  give  access  to  quality  assured 
learning  content,  supported  by  around  EUR 16 
million of RRF and EUR 64 million of ESF+ funding. 
The  RRP  includes  other  measures  to  strengthen 
VET,  and  the  ESF+  supports  implementing  the 
Lithuanian  skills  strategy.  This  is  all  expected  to 
contribute  to  achieving  the  target  of  at  least 
53.7%  of  all  adults  participating  in  training  every 
year  by  2030  (starting  from  25%  in  2016). 
Despite  the  increase  to  21.4%  in  2021,  the 
percentage  of  children  aged  less  than  3  years  in 
formal  childcare  remains  below  the  2019  (pre-
COVID-19)  level  of  26.6%  and  significantly  below 
the EU average (36.2%). This has the potential  to 
harm the educational and labour market outcomes 
in the longer term.  

Income inequality remains critically high. The 
income of the top 20% of the income distribution 
exceeded those of the bottom 20% by 6.14 times 
in  2020  and  2021  (vs.  EU:  4.89%  and  4.97% 
respectively). Although the share of people  at risk 
of  poverty  or  social  exclusion  (AROPE)  decreased 
slightly to 23.5% in 2021, it remains substantially 
higher than the EU average (21.7%). The situation 
is  particularly  difficult  outside  the  capital  region 
(see  Annex  17)  for  older  people  and  women. 
Pensions are among the lowest  in the EU relative 
to  work  incomes.  The  situation  of  vulnerable 
households may deteriorate further due to soaring 
energy  prices  and  inflation.  As  part  of  its  RRP,  in 
2022  Lithuania  introduced  a  reform  on  pension 
calculation 
increase  both  common  and 
individual  parts  of  pensions.  Along  with  other 
efforts (98)  (e.g.,  single-person  benefits,  etc.)  the 

to 

(98)  European Commission, Joint Research Centre, EUROMOD 
simulation. The combined effect of the increase in basic 
social allowance and state supported income in January 
2023 is expected to reduce poverty risk for the whole 
population (3.4%) and especially for single parents with 
children (12.7%). The increase in the single-benefit in 
January 2023 is expected to reduce poverty among single 
older individuals (-1.1%). 

60 

measures introduced could help address structural 
challenges  of  high  levels  of  poverty,  including 
energy poverty. This is highlighted by the share of 
the  population  unable  to  keep  their  homes 
adequately  warm  at  22.5%  (vs.  EU:  6.9%)  (see 
also  Annex  8).  Despite  high  levels  of  poverty  and 
social  exclusion  among  persons  with  disabilities, 
there is a shortage of person-centred community-
based services. More than EUR 175 million of ESF+ 
funding  is  allocated  to  address  the  need  for 
personalised  services  to  persons  with  disabilities 
and  other  vulnerable  groups.  In  addition,  recent 
labour 
reforms  on  disability  assessment  and 
market  participation  of  persons  with  disabilities 
are aimed to address the issues mentioned above. 

Table A14.2: Situation of Lithuania on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months. 
(2) Number of persons at risk of poverty or social exclusion 
(AROPE), reference year 2019. 
Source: Eurostat, DG EMPL. 

reform 

and  47% 

to  proactively 

The  adequacy  of  the  social  safety  net 
remains low. The minimum income is only equal 
to  50%  of  the  poverty  threshold  and  33%  of  the 
income  of  the  low-wage  earner  in  2021  (vs  EU:  
59% 
respectively).  Government 
expenditure  on  social  protection  increased  to 
16.3% of GDP in 2020 but remained very low (vs. 
EU: 21.9%). On average, just 9.6% of those below 
the  at-risk-of-poverty  threshold  received  social 
assistance  in  2020.  To  address  this,  Lithuania 
introduced  a 
identify 
vulnerable people in need of social assistance and 
committed  to  a  reform  of  the  minimum  income 
scheme under the RRP. In 2021, unmet needs for 
medical  care  (2.4%)  have  surpassed  the  EU 
average  (2%)  and  the  out  of-pocket  expenditure 
on  healthcare  (28.7%)  was  almost  twice  the  EU 
average in 2020 (14.4%), pointing to challenges in 
access to services (see Annex 16). Life expectancy 
is 5.3 years below the EU average. More than one 
third  of  older  people  needed  long-term  care  in 
2020, but access to formal  care (paid services) is 
limited  by  high  out-of-pocket  costs.  To  tackle 
these issues, the government plans under the RRP 
to introduce a new long-term care model in 2024. 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203079.0(2022)25.0(2016)-51(2021)Adult learning1 (%)5460Employment (%)8178Poverty reduction2 (thousands)-223-15 000 
                                                 
 
     
 
This  and  other  measures  will  contribute  to 
achieving  the  national  target  of  223 000  fewer 
people  at  risk  of  poverty  or  social  exclusion  by 
2030. 

61 

 
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Lithuania’s  education  and  training  system  in  light 
of  the  EU-level  targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

Participation  in  early  childhood  education 
(ECE) keeps increasing. In 2020, 90.9% of 3-6-
year-olds  participated  in  ECE,  an  increase  of  3.6 
percentage points (pps) since 2015, but still below 
the  EU  average  of  93%.  Planned  investments  for 
2021-2027  financed  through  national  and  EU 
funds  could  further  increase  participation.  They 
aim  to  address  infrastructure  gaps  in  rural  and 
urban  areas.  The  arrival  of  Ukrainian  displaced 
children  has  exacerbated  the  problem  of  limited 
early  childhood  education  and  care  provision  in 
urban  areas.  The  implementation  of  measures  to 
strengthen  monitoring  and  evaluation  and  to 
improve the educational content are underway. 

In  addition, 

the  government 

Steps  are  being  taken  to  address  teacher 
shortages.  Starting  in  2022,  students  in  their 
final  year  who  sign  a  three-year  employment 
contract  with  a  school  or a  municipality  receive  a 
scholarship. 
is 
planning  to  expand  funding  and  opportunities  for 
in-service  teacher  training,  for  them  to  obtain  an 
additional specialisation to teach a second subject 
to  address  shortages. 
In  2021,  qualification 
requirements  for  teachers  were  made  more 
flexible  to  allow  motivated  professionals  who  do 
not  have  a  teacher  qualification  to  work  as  a 
teacher. In 2022, 388 professionals were admitted 
to the course to become teachers. All places were 
funded by the state. In 2021, state-funded places 
totalled  about  200.  Ageing  of 
teacher 
workforce  and  planned  reforms  such  as  the 
universalisation of childcare as of 2023 call for a 
close monitoring of teacher supply and demand. 

the 

Improving  working  conditions  and  career 
progression  may  promote  the  attractiveness 
of the teaching profession. To do so, Lithuania 
is  working  on  a  review  of  the  career  model.  The 
reorganisation  of  the  school  network  may  also 
improve  working  conditions  by  reducing  the 
number  of  small  schools  with  a  low  number  of 
teaching  hours  and  providing  better 
learning 
environments.  The  low  relevance  of  continuous 
professional development remains an issue. 

To improve student performance, a reform of 
the  student 
school 

curricula  and  of 

62 

assessment  system  is  ongoing.  Teachers  will 
implementation  of  the 
be  prepared  for  the 
competence-based curriculum. Mandatory tests on 
pupils’  achievements  in  grades  4,  8  and  10  have 
been introduced. 

great 

enjoy 

autonomy; 

Addressing  inequalities  in  school  education 
remains  a  key  challenge.  Currently,  student 
performance  is  closely  related  to  socio-economic 
background.  Disadvantaged  pupils  are  more  likely 
to  be  attending  the  same  schools.  Lithuanian 
schools 
differing 
approaches  to  setting  school  and  programme 
admission  criteria  can  exacerbate  differences 
between  schools  and 
increase  segregation. 
Although  not  compulsory,  admissions  based  on 
academic  performance  are  common  at  lower 
secondary  level.  This  practice  risks  perpetuating 
the  stratification  of  students  not  only  by  ability, 
but  also  by  socio-economic  background.  Grouping 
pupils by ability is also a common practice in lower 
secondary  schools,  but  one  that  risks  increasing 
the  performance  gap  between  students  from 
disadvantaged  and  more  affluent  backgrounds. 
Overcrowding of public schools in the bigger cities 
due  to 
internal  migration  has  fostered  the 
dramatic  expansion  in  the  number  of  students 
enrolled  in  private  schools (99).  Students  in  these 
schools  tend  to  perform  much  better  than  their 
peers  in  public  schools.  The  Millennium  School 
the 
programme  envisaged 
recovery  and 
in 
to  provide  equal 
resilience  plan  may  help 
opportunities  for  all  children  irrespective  of  their 
place  of  living,  and  to  improve  overall  student 
the 
achievement.  Lithuania 
in 
into 
integration  of  special  needs  students 
mainstream schools as of 2024. 

investing 

is 

Measures  are  underway  (see  Annex  14)  to 
improve  the  quality  and  attractiveness  of 
vocational  education  and  training  (VET). 
Compared  with  the  EU  average  (48.7%),  only 
24.7%  of  upper  secondary  pupils  in  2020  were 
enrolled  in  VET.  The  share  of  VET  graduates  (20-
34)  benefiting  from  exposure  to  work-based 
learning  during  their  vocational  education  (ISCED 
3-4)  was  46.7%  in  2022,  below  the  EU  average 
(60.1%). 

(99)  The number of pupils enrolled in private schools increased by 
49.5% between 2015 and 2020 (EU 4.7%). The share of 
students attending private schools is relatively low; it stood 
at 4.4% in 2020. 

 
 
                                                 
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Data is not yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 
Source: (1,3,4,5,7,8,9,10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre).  

A  high  proportion  of  young  people  (25-34) 
tertiary  education  but 
have  attained 
disadvantaged students have less possibility 
to  access  university.  The  overall 
tertiary 
attainment rate is quite high, at 58.2%, compared 
with the EU average of 42.0%. However, it is much 
lower  among  young  men  and  in  rural  areas.  In 
2020, only 17% of upper secondary students from 
low-income  families  entered  tertiary  education, 
compared  with 
high-income 
families (100). State-funded study places at tertiary 
level  are allocated based on the results of school 
leaving  exams.  This  merit-based  approach  does 
not  sufficiently  support 
the  participation  of 
students  from  vulnerable  groups.  As  of  2024,  up 
to 10% of state-funded places will support access 
for  disadvantaged  students.  Career  guidance 
services  are  often  not  available  to  the  same 
standard  throughout  the  country.  Making  the 
provision  of  career  guidance  mandatory,  as 

from 

68% 

(100) OECD (2021). OECD Skills Strategy Lithuania: Assessment 

and Recommendations, OECD Skills Studies, OECD Publishing, 
Paris, https://doi.org/10.1787/14deb088-en. 

63 

envisaged in the recovery and resilience plan, may 
also  help  improve  equity  in  access  to  higher 
education. 

tertiary 

Academic  excellence  and 
labour  market 
institutions  are 
relevance  of 
relatively  low.  The  alignment  of  admission 
requirements  for  state-funded  and  non-state-
funded  tertiary  education  study  places  will  come 
into effect in 2024. Currently, the requirements for 
non-state-funded  places  are  considerably  lower 
and  a  large  share  of  higher  education institutions 
rely  on  tuition  fees  of  low-performing  students. 
The  aim  of  the  alignment 
is  to  raise  the 
achievements  of  students  entering  into  tertiary 
education.  Lithuania  is  reorganising  the  college 
network  and  reforming  funding  arrangements  to 
favour  quality  and  efficiency  in  colleges  and 
universities.  The  new  funding  formula  allocates  a 
significant  share  of  public  funding  according  to 
study 
to 
performance 
effectiveness, 
graduates’ 
careers  and  other  quality  metrics.  This  may  pave 

targets 
internationalisation, 

related 

96%87.3%91.9%90.9%202093.0%2020Reading< 15%25.1% 20.0%24.4%201822.5%2018Mathematics< 15%25.4% 22.3%25.6%201822.9%2018Science< 15%24.7% 21.1%22.2%201822.3%2018< 9 %5.5%11.0%4.8% 9.6%Men6.9%12.5%5.5%11.1%Women4.0%9.4%4.0%u8.0%Cities2.2%u9.6%1.7%u8.6%Rural areas8.3%12.2%6.7%10.0%Native5.5%10.0%4.8%8.3%EU-born:u20.7%:u20.3%Non EU-born:u23.4%:u22.1%6Equity indicator (percentage points)::20.4201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :46.7%60.1%45%54.8%36.5%58.2%42.0%Men45.0%31.2%49.5%36.5%Women64.9%41.8%67.1%47.6%Cities68.2%46.2%72.5%52.2%Rural areas39.6%26.9%43.7%30.2%Native54.8%37.7%58.0%43.0%EU-born:u32.7%:u39.5%Non EU-born55.3%u27.0%63.2%35.7%46.7% 38.3%55.8%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetLithuaniaEU27LithuaniaEU27 
                                                 
 
  
 
the  way  for  further  consolidation  of  the  tertiary 
education network. 

64 

 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Lithuania.  

Life  expectancy  in  Lithuania  remains  among 
the lowest in the EU, having further dropped 
by 0.6 years in 2021 compared to 2020.  This 
reflects  the  increase  in  COVID-19  mortality  in 
2021 (more than doubled compared to 2020 (101)). 
Levels  of  preventable  and  treatable  mortality  in 
Lithuania remain high compared to the EU overall, 
suggesting  that  the  effectiveness  of  healthcare 
lags behind. In 2020, the leading causes of death 
the  circulatory  systems 
were  diseases  of 
(“cardiovascular diseases”) followed by cancer and 
external  causes.  Lithuania  made  progress 
in 
reducing  historically  high  mortality  rates  from 
suicide,  but  it  remains  an  important  cause  of 
death, particularly among men. At the same time, 
mortality in the economically active age groups as 
a share of total mortality is among the highest in 
the EU. 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

funded 

In  2020, 

Health expenditure in Lithuania is among the 
lowest  in  the  EU  and  only  70.1%  of  it  was 
publicly 
in  2020.  Spending  on 
pharmaceuticals and medical devices is below the 
EU  average  while  spending  on  outpatient  care  is 
total  healthcare  spending 
above. 
increased to 7.5% of GDP, up from 7.0% in 2019. 
This is in line with the upward trend in all Member 
States in 2020. In Lithuania, this increase is mainly 
attributable to higher spending per capita (against 
a  backdrop  of  stagnating  GDP  growth  in  2020). 
This  said,  as  a  share  of  total  public  spending, 
health  spending  dropped  from  14.6%  in  2019  to 

(101) Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023). 

65 

13.9%  in  2020.  In  2020,  the  share  of  out-of-
pocket healthcare spending was almost double the 
EU  average,  at  28.7%.  However,  recent  policies 
reducing  co-payments  for medicines  are  expected 
to  lessen  the  financial  burden  on  the  most 
vulnerable  households.  Public  expenditure  on 
health  is  projected  to  increase  by  0.6  percentage 
points (pps) of GDP by 2070 (compared to 0.9 pps 
for the EU overall). This projection is based on the 
age profile of the Lithuanian population.  

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

Lithuan
ia

EU

4,2

0,6

6,6

0,9

0

2

4

6

8

% of GDP

AWG reference scenario 
Source: European Commission / EPC (2021) 

in  Lithuania 

In 2020, spending on prevention in Lithuania 
amounted  to  3.9%  of  total  spending  on 
healthcare,  compared  to  3.4%  for  the  EU 
overall.  Between  2020  and  2019,  spending  on 
prevention 
increased  by  56%, 
compared  to  a  26%  increase  for  the  EU  overall. 
Across  the  EU,  this  increase  was  primarily  driven 
by  spending  on  disease  detection,  surveillance, 
control  and  response  programmes  as  part  of  the 
public  health  response  to  COVID-19.  Between 
remarkable  proportional 
2019  and  2020,  a 
increase 
in 
Lithuania  for  programmes  for  epidemiological 
surveillance,  risk  and  disease  control,  as  well  as 
for  disaster  preparedness  and 
emergency 
response.  For  the  latter  in  particular,  Lithuania 
reported  the  highest  proportional  increase  of  all 
Member  States.  However,  a  substantial  budget 
decrease was noted for information, education and 
counselling,  which  are  essential 
increase 
to 
participation in preventive programmes.  

in  reported  spending  was  noted 

Lithuania  faces  shortages  and  an  uneven 
distribution  of  health  workers.  Lithuania  had 
7.8  nurses  per  1 000  population  in  2020,  below 
the  EU  average  of  8.3.  At  the  same  time,  the 
number  of  doctors  was  among  the  highest  in  the 
EU, at 4.5 per 1 000, compared to an EU average 
of  3.9.  While  the  number  of  doctors  continues  to 

74.975.876.076.575.174.280.980.981.081.380.480.1201620172018201920202021LithuaniaEU 
 
        
                                                 
  
 
Table A16.1: Key health indicators 

Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

grow, the number of nurses has not kept pace. As 
part  of  the  reorganisation  of  the  network  of 
healthcare institutions, Lithuania has identified the 
need to finance the training of an additional 1 000 
nursing assistants in 2022. According to forecasts, 
the  shortage  of  nurses  could  reach  more  than 
3 000 
in  2030.  Working  conditions  are  an 
important  issue,  with  low  remuneration  being  a 
deterrent  to  entering  the  profession,  in  particular 
for nurses (whose remuneration level is the lowest 
of the EU when put in relation to national average 
wage  levels).  In  November  2021,  the  Ministry  of 
Health  signed  a  collective  agreement  with  trade 
unions.  The  wage  mechanism  was  revised,  linking 
it  to  the  country’s  average  wage.  The  agreement 
envisages  a  steady  improvement  of  wages  and 
contains  additional  guarantees  and  plans  to 
improve  workers’  mental  health  and  work-life 
balance.  Further,  the  geographical  spread  of 
doctors  presents  a  challenge.  The  biggest 
concentration  of  doctors  is  in  the  Vilnius  and 
Kaunas  districts.  In  2020,  the  average  number  of 
doctors  per  1 000  inhabitants  in  Vilnius  and 
Kaunas  was  6.2,  more  than  twice the  level  in  the 
rest of the country. Measures are taken to attract 
medical  graduates  and  encourage 
to 
establish 
regions  with  fewer 
in 
doctors.  Moreover,  investments  from  cohesion 
policy  funds  are  planned  to  make  working 
conditions  in  these  regions  more  attractive  for 
young  people.  However,  the  results  are  still  to  be 
seen. 

themselves 

them 

Through  its  recovery  and  resilience  plan 
(RRP),  Lithuania  plans  to  invest  EUR  257 
million  (11.6%  of  the  RRP’s  total  value)  in 
strengthen 
healthcare.  Measures  aim 
emergency  care, 
infectious  diseases, 
develop digital health infrastructure, build capacity 
therapies,  create  a 
for  advanced  medical 

tackle 

to 

competence platform for healthcare professionals, 
and  set  up  a  system  to  monitor  quality  of  care. 
The implementation of the RRP is progressing, with 
several ongoing measures, for example the action 
plan for improved cooperation between healthcare 
institutions and modernisation of infrastructure for 
emergency situations, and the updated action plan 
on  family  medicine  development  for  2016-2025. 
Historical 
in  healthcare, 
measured  as  gross  fixed  capital  formation,  are 
low. 

investment 

levels  of 

Primary  care  and  disease  prevention  face 
longstanding  challenges  in  Lithuania,  mainly 
linked  to  structural  underfunding  of  the 
health  sector  and  insufficient  resources.  The 
high  reliance  on  inpatient  care  with  very  high 
levels  of  avoidable  hospital  admissions  and 
varying quality of care is a longstanding issue, that 
hints at the underdeveloped role of primary care in 
is  working  on 
care  coordination.  Lithuania 
transforming  the  hospital  network,  moving  away 
from  hospital  care  to  a  model  based  on  stronger 
primary  care.  This  work,  combined  with  further 
innovative  solutions  (e.g.  digital  ones)  have  the 
potential  to  increase  the  efficiency  and  resilience 
of the health system. However, the results are still 
to  be  seen.  Levels  of  preventable  and  treatable 
mortality  in  Lithuania  remain  high.  Recent  quality 
checks on the treatment of heart attack and stroke 
patients  show 
that  not  all  providers  are 
appropriately  equipped  to  provide  high-quality 
care  for  conditions  that  are  among  the  deadliest 
for  the  population.  There 
is  also  scope  for 
improvement  in  cancer  care  –  in  both  screening 
coverage  and  survival  rates  for  many  treatable 
cancers. The highest rate of mortality from suicide 
in  the  EU  is  reported  for  Lithuania  (2019  data), 
suggesting a potential for preventive measures to 
foster mental wellbeing. Analytical work to ensure 

66 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)184.9185.6181.0199.7NA91.7 (2020)Cancer mortality per 100 000 population273.6272.7271.5276.5NA242.2 (2020)Current expenditure on health, % GDP 6.56.57.07.5NA10.9 (2020)Public share of health expenditure, % of current health expenditure66.167.266.470.1NA81.2 (2020)Spending on prevention, % of current health expenditure 2.22.32.73.9NA3.4 (2020)Acute care beds per 100 000 population544530520497506387.4 (2019)Doctors per 1 000 population *4.64.64.64.5NA3.9 (2020)Nurses per 1 000 population *7.77.87.77.8NA8.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption for CY and CZ) **14.414.013.811.911.714.5 (2021) 
 
   
 
the  quality  of  healthcare  is  planned  to  be  carried 
out  together  with  the  development  of  an  action 
plan.  New  indicators  to measure  the  performance 
and  quality  of  public  and  budgetary  bodies  have 
been  validated.  A  tool  is  in  place  to  assess 
patients’  feedback  on  the  provision  of  health 
services.  

67 

 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

regional  dynamics 

This  Annex  showcases  the  economic  and 
social 
in  Lithuania, 
providing  an  update  on  economic,  social  and 
regions 
in 
territorial 
compared  with  the  EU  as  a  whole  and  its  main 
regional economic recovery challenges.  

Lithuania's 

cohesion 

Regional disparities in Lithuania remain high. 
In 2021 GDP per capita was above the EU average 
only  in  Vilnius  county  at  around  126%,  but  was 
less  than  half  the  EU  average  in  several  NUTS 3 
regions,  going  as  low  as  48%  in  Tauragė  county, 
which  borders  Russian  Federation’s  exclave 
Kaliningrad. 

Graph A17.1: GDP per capita (in purchasing power 
standard) in Lithuania by NUTS-3 region, 2020 

low 
by 

in  Lithuania  and 

Labour  productivity  is  generally  on  the  rise 
but  remains 
is 
characterised 
regional 
differences.  Vilnius,  Kaunas  and  Klaipėda 
counties  had  the  highest  labour  productivity  in 
2021  at  around  90%  of  the  EU  average.  At  the 
other  end  of  the  spectrum,  labour  productivity  in 
Tauragė county was only 52% of the EU average. 

significant 

remain 

Significant  disparities 
in  social 
indicators. Only 50% of the population aged 30-
34  was  tertiary  educated  outside  the  capital 
region (at NUTS 2 level) in 2021 – compared with 
around  75%  in  the  Capital  region  itself.  The 
population  living  outside  the  Capital  region  also 
faces  a  less  advantageous  labour  market:  in  the 
region  of  Central-Western  Lithuania,  employment 
rate  is  75%  and  unemployment  is  8%,  while  the 
respective indicators in the Capital region are more 
and 
positive: 
unemployment 5%. Overall, this results in a larger 
share of the population at risk of poverty or social 
exclusion (AROPE) outside the Capital region. While 
the AROPE rate is 19% in the Capital region, it as 
high as 27% in Central-Western Lithuania. 

employment 

is  84% 

rate 

Analysing  statistics  by  the  degree  of 
urbanisation  reveals  significant  regional 
disparities. The unemployment rate in cities was 
on  average  as  low  as  5.8%  in  2021  but  much 
higher  in  towns  and  suburbs  and  in  rural  areas 
(both  at  8.3%).  Highly  skilled  workers  tend  to 
concentrate  in  cities  in  Lithuania.  Around  60%  of 
workers  in  cities  are  tertiary  educated  but  only 
around  30%  in  towns  and  suburbs,  and  rural 
areas.  The  AROPE  rate  in  cities  (18%)  was  lower 
than  the  EU  average  (21.7%)  in  2021  but  much 
higher  in  towns  and  suburbs,  and  in  rural  areas 
(26% and 28% respectively).  

Lithuanian  is  undergoing  rapid  depopulation, 
particularly  outside  the  Capital  region. 
in 
Lithuania's  population  decreased  by  8.8% 
2011-2020.  The  population  increased  in  Vilnius 
county by 3.6%, but there were significant falls in 
all the other counties (as much as -20 per 1000 in 
Tauragė and Utena counties). Population ageing is 
becoming a challenge in some counties. The share 
of  elderly  people  aged  65  and  above  has 
increased  sharply  since  2014  to  over  30%  in 
Utena, Panevėžys and Alytus counties.  

Source: Eurostat, DG REGIO calculations 

GDP  per  capita  has  grown  at  a  fast  pace  in 
most  of  the  country.  Šiauliai,  Tauragė,  and 
Kaunas  counties  have  grown  fastest  between 
4.76% and 5.02% per annum in 2011-2020. This 
compares with 4.5% for the whole country. Vilnius 
county  grew  close  to  the  national  average  – 
4.27%,  while  Telšiai  county,  bordering  with  Latvia 
in the North, grew at the slowest rate (2.86% per 
annum). 

68 

 
 
 
 
 
 
 
Table A17.1: Selected indicators at regional level - Lithuania 

Source: Eurostat, EDGAR database 

The  digital  divide  between  urban  and  rural 
areas remains sizeable. 88.8% of all Lithuanian 
households  had  fixed  broadband  at  the  end  of 
June  2021  but  only  64.0%  of  rural  households 
were subscribed to fixed internet at rural level (the 
EU average  for rural households was 91%) (102). 

Graph A17.2: Lithuania, Regional Competitiveness 
Index, 2022 

Significant  disparities  between  the  two 
NUTS2  regions  persist  according  to  the 
Regional  Competitiveness  Index  2022.  The 
Capital  region  stands  substantially  better  than 
Central-Western  Lithuania  on  aspect  such  as 
innovation, 
higher 
education and lifelong learning.   

sophistication, 

business 

Source: European Commission 

Lithuania’s economy and labour market have 
showed  strong  resilience  to  the  COVID-19 
pandemic. The most significant decline in GDP per 
capita in Vilnius county (-1.3%) was offset by the 
mild  impact  in  other  counties,  ranging  from  a 
negligible  decrease  in  Marijampolė  county  to  an 
increase in Telsiai county (+1.9%).  Unemployment 
at NUTS 2 level picked up in both regions by more 
than 2 percentage points (pps) in 2020 and swiftly 
fell back to the 2019 level (+0.4 pps in the capital 
region  and  +1  pps  in  the  central-western  region). 
The  upward  trend  in  employment  similarly  fell 
back  slightly  in  2020,  remaining  just  around  the 
2019 level (-0.3 pps in the capital region and -1.1 
pps in the central-western region). 

(102) Source: Report on broadband coverage in Europe 2021. 

69 

NUTS 3 RegionGDP per head (PPS)GDP per head growthProductivity (GVA (PPS) per person employed)Real productivity growthPopulation growthNet migrationEU27=100, 2021Avg % change on preceding year, 2011-2020EU27=100, 2021Avg % change on preceding year, 2011-2020Avg annual change per 1000 residents, 2011-2020Avg annual change per 1000 residents, 2011-2020European Union1000.591000.23Lithiania884.49822.48-8.80-4.80Vilnius county1264.27890.713.604.40Alytus county533.80562.54-17.36-9.43Kaunas county895.02944.06-5.88-1.71Klaipėda county812.93892.78-3.70-1.09Marijampolė county544.02612.96-18.55-12.30Panevėžys county654.73773.71-19.08-11.63Šiauliai county674.76763.89-13.89-7.74Tauragė county484.93523.43-20.65-14.60Telšiai county602.86610.32-16.60-12.65Utena county522.90622.35-20.73-9.55 
 
                                                 
 
 
   
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

The  Lithuanian  banking  sector  is  relatively 
small  compared  with  other  EU  countries and 
is  exposed  to  concentration  and  spill-over 
risks  due  to  its  integration  with  the  Nordic 
and Baltic banking systems. At the end of Q3-
2022  banks’  assets  were  equivalent  to  85.6%  of 
GDP.  The  two  largest  banking  groups,  Swedbank 
and  SEB  (representing  35%  and  26%  of  total 
banking-sector  assets  respectively),  are  owned  by 
their parent  banks in  Sweden.  Lithuania’s  banking 
sector  remains  one  of  the  most  concentrated  in 
the  EU,  which  implies  a  high  dependency  of  the 
sector  on  individual  banks.  The  parent  companies 
of  the  two  largest  banks  also  serve  the  housing 
market  in  Sweden,  so  developments  in  Sweden 
may also impact their Lithuanian business.  

Most  performance 
indicators  for  banks 
operating in Lithuania are among the best in 
the  EU.  Profitability  remains  below pre-pandemic 
levels  but  above  those  of  euro-area  peers.  For 
example,  at the  end  of  Q3-2023  return  on  equity 
was 13.6% vs 6.1% in the euro area, and return on 
assets  0.8%  vs  0.5%  in  the  euro  area.  At  19.8%, 
the capital adequacy ratio remains well above the 
required  minimum.  Although  the  historically  high 
liquidity-coverage  ratio  decreased  from  743%  in 
2020  to  269.6%  at  the  end  of  Q3-2022,  the 
banking sector remains highly liquid. Thanks to the 
strong and stable domestic customer-deposit base 
credit  institutions  do  not  need  to  draw  additional 
funding  from  financial  markets.  This  mitigates 
their  exposure  to  possible  global  financial  stress 
and  capital  flight  in  times  of  market  volatility.  It 
also  limits  their  reliance  on  cross-border  parent 
banking groups. The cost-to-income ratio for banks 
operating in Lithuania, which historically is one of 
the  lowest  in  the  EU,  increased  from  48.6%  in 
2020 to 51.6% in Q3-2022, partly impacted by a 
low  loan-to-deposit  ratio  of  62.7%.  The  leverage 
ratio stood at 6.1% at the end of Q3-2022. As the 
health  of  companies  and  households  improved  in 
recent years, the share of non-performing loans in 
banks fell to 1.0%, its lowest level since 2008.  

Geopolitical  and  inflationary  pressures  risk 
lowering  loan  demand  and  asset  quality  of 
financial  institutions.  The  disposable  income 
and  purchasing  power  of  households  is  being 
eroded by: (i) falling demand; (ii) high inflation; and 
(iii)  market  disruptions  triggered  by  Russia’s  war 
against  Ukraine.  These  factors  are  also  damaging 
companies’  profits,  which  in  turn  weakens  the 

70 

loans 

repayment capacity of debtors. Debt-service ratios 
will  increase  as  a  result  of  monetary-policy 
tightening.  These  pressures  risk  reducing  financial 
loan  demand  and  asset  quality. 
institutions’ 
Moreover,  banks  anticipate  that  they  will  tighten 
their  credit  standards,  and  that  their  lending  will 
soon  become  more  cautious.  If  the  share  of  non-
increases  significantly,  then 
performing 
there  may  be  a  decline  in  banks’  risk  appetite, 
credit  volumes,  and  profitability.  On  the  other 
hand,  there  are  some  factors  that  may  mitigate 
risks.  For  example,  many  households 
these 
increased  their  savings  during  the  pandemic,  and 
credit  institutions  were  able  to  accumulate  large 
capital  reserves.  If  required,  these  will  act  as  a 
buffer to withstand even significant losses. In fact, 
stress tests by the Bank of Lithuania the country’s 
central  bank,  suggest  that  the  system  would  be 
able  to  absorb  losses  under  a  severe-downside 
scenario, assuming a cumulative decline in output 
and  real-estate  prices  of  7.5%  and  17.5% 
respectively over 2 years.  

Graph A18.1: Evolution of credit activity 

Source: ECB. 

Loans  to  Lithuanian  households  and  to  non-
financial corporations rose significantly over 
the  course  of  2022.  By  the  end  of  Q3-2022, 
their  annual  growth  rate  stood  at  12.3%  and 
17.3%,  respectively.  Mortgages  still  account  for 
the  largest  share  of  bank  assets,  driven  by  low 
interest  rates  and  strong  household 
income, 
against  the  backdrop  of  rapidly  rising  residential 
real-estate  prices  (up  75%  since  2015).  Although 
these  dynamics  seem 
line  with 
fundamentals,  the  recent  acceleration  in  house 
prices  may  be  a  sign  of  overheating.  In  general, 

to  be 

in 

-20-1001020304050200920102011201220132014201520162017201820192020202120222023Total privateNFCHH% 
 
 
  
 
Table A18.1: Financial soundness indicators 

(1) Last data: Q3 2022. 
(2) Data is annualized. 
Source: ECB, Eurostat, S&P Global Capital IQ Pro. 

nearly  half  of  real-estate  transactions  do  not 
involve  a  mortgage,  suggesting  that  the  house-
price increase was not exclusively credit driven.  

To  address  potential  risks  to  the  financial 
sector  from  rising  residential  real-estate 
prices  and  the  banking  sectors'  increased 
exposure  to  mortgage  loans,  the  Bank  of 
implemented  a  series  of 
Lithuania  has 
macroprudential  measures.  These 
include 
stricter  down-payment  requirements  for  second 
and  subsequent  mortgage  loans  (from  January 
2022)  and  an  additional,  sectoral  systemic  risk 
buffer of 2% for all retail-loan exposures that are 
secured by residential property (applying from July 
2022).  Loan-to-value  ratios  on  new  loans  have 
fallen  since  the  measure  was 
implemented. 
Incipient  signs  of  risk  to  financial  stability  may 
require either further tightening of borrower-based 
measures  or  increasing  the  countercyclical  capital 
buffer.  

The  swift  expansion  of  FinTech  companies 
for  anti-money 
brings  new  challenges 
laundering  supervision.  Growth  of  Lithuania’s 
FinTech hub gained momentum after the adoption 
of a FinTech strategy in 2016. With a continuously 
improving  business  and  regulatory  environment 
since then (e.g. thanks to the 2021 FinTech action 
plan), Lithuania became the largest FinTech hub in 
the  EU  as  measured  by  the  number  of  licensed 
include 
companies.  Core  business  activities 
payment  services,  financial  software, 
lending, 
digital  banking,  and  blockchain.  The  Lithuanian 
central  bank  has  set  up  a  regulatory  ‘sandbox’  to 

71 

and 

soared, 

registration 

transactions 

allow  both  existing  and  potential  FinTech 
companies  to  test  out  innovations.  The  FinTech 
expansion  was  also  facilitated  by  enabling 
financial-services  providers  such  as  payment 
institutions  and  electronic  money  institutions  to 
use  the  Bank  of  Lithuania’s  CENTROlink  payment 
system 
to  access  single-euro-payments-area 
infrastructure  in  2020.  As  a  result,  cross-border 
these 
payment 
transactions  were  mostly  conducted  by  non-
residents, including with higher-risk jurisdictions. In 
for 
addition,  Lithuania’s 
virtual-asset service providers involves a low level 
of  entry  checks  and  requirements,  and  this  has 
attracted  many  new  entrants, 
significantly 
reshaping  the  financial  sector  and  its  risk  profile. 
To  ensure  commensurate  resources  and  capacity 
for  effective  supervision,  regulation,  and  law 
enforcement 
government 
agencies, the Bank of Lithuania has now entrusted 
the  growth  strategy  of  digital  finance  to  a 
specialised 
Financial  Market 
for 
Development.  In  addition  to  an  active  payments 
market,  the  Centre  will  focus  on  attracting  new 
participants in  other  segments  such  as  the  credit, 
capital  and  insurance  markets.  The  Bank  of 
Lithuania has also decided to upgrade CENTROlink. 

different 

regime 

Centre 

across 

201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)67.566.165.879.679.085.6276.8207.9Share (total assets) of the five largest banks (%)90.190.990.491.889.8--68.7Share (total assets) of domestic credit institutions (%)18.48.99.59.711.625.8-60.2NFC credit growth (year-on-year % change)5.45.1-0.7-14.011.217.9-9.1HH credit growth (year-on-year % change)7.68.67.16.110.412.2-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)3.22.61.72.21.21.01.81.8- capital adequacy ratio (%)19.118.619.921.923.519.818.619.8- return on equity (%)29.112.314.510.010.413.66.16.6Cost-to-income ratio (%)148.944.947.048.660.351.660.651.8Loan-to-deposit ratio (%)178.879.577.263.361.862.788.678.0Central bank liquidity as % of liabilities1.20.70.20.54.13.1-2.9Private sector debt (% of GDP)56.256.155.254.453.9--120.7Long-term interest rate spread versus Bund (basis points)-0.8-8.756.373.353.3-52.8-93.3Market funding ratio (%)18.021.722.336.736.2-50.840.0Green bonds issued to all bonds (%)2.04.64.13.33.12.93.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
 
   
 
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview of Lithuania’s tax system. It includes 
information on the tax structure (the types of tax 
that  Lithuania  derives  most  of  its  revenue  from), 
the  tax  burden  on  workers,  and  the  progressivity 
and redistributive effect of the tax system. It also 
provides 
tax  collection  and 
compliance. 

information  on 

(pps)  compared 

Lithuania’s tax revenues are relatively low in 
relation  to  its  GDP.  Table  A19.1  shows  that 
Lithuania’s  tax  revenues  as  a  percentage  of  GDP 
were  considerably  below  the  EU  aggregate  in 
2021,  though  they  increased  by  1.4  percentage 
points 
to  2020.  Lithuania’s 
revenues  from  labour  and  capital  taxes  are 
significantly  lower  as  a  percentage  of  GDP  than 
the  EU  aggregate.  Revenues  from  consumption 
taxes  and  environmental  taxes  were  close  to  the 
EU  aggregate  as  a  share of  GDP, but higher  as  a 
(see  Graph  A19.1). 
share  of 
Revenues from recurrent property taxes, which are 
among  the  taxes  least detrimental  to  growth,  are 
very  low.  This indicates  that  there  is potential  for 
an  increased  use  of  the  income,  property,  and 
environmental 
Lithuanian 
government  has  made  a  commitment  to  find  a 
national consensus on what the future level of tax 
revenues  as  a  share  of  GDP  should  be  to  fund  a 
significant 
in  public  spending  and 
guarantee fiscal sustainability.  

increase 

taxation 

bases. 

total 

The 

tax 

and 

inefficient 

Lithuania’s  Recovery  and  Resilience  Plan 
includes  tax  reforms  to  address 
(RRP) 
current  challenges.  Planned  reforms,  which  are 
currently pending, include broadening the tax base 
coming from sources less detrimental to economic 
growth 
or 
abolishing 
environmentally  unfriendly  tax  exemptions  and 
special tax regimes (see also Annex 6). The reform 
is  expected  to  create  a  more  adequate  and 
sustainable 
the 
revenue  base  and 
redistributive  capacity  of  the  tax  and  benefit 
system. 
the  highly 
differentiated  tax  treatment  of  different  income 
sources,  reduce  incentives  for  tax  arbitrage  and 
make  the  system  simpler,  more  transparent,  and 
fairer. 

It  should  also  address 

increase 

Lithuania  has  a  fragmented  and  distortive 
taxation  of  income.  A  recently  published  report 
by  the  World  Bank  pointed  to  72  differentiated 
income tax treatments by (i) type of entity, (ii) size, 
(iii)  type  of  activity,  and  (iv)  sources  of  income 
(capital/labour).  This  could  be  simplified  and 
harmonised.  The  personal  income  tax  system 
currently  lacks  efficiency  and  equity,  with  large 
variations  in marginal  and  average  tax  rates paid 
at  a  given  overall  level  of  income.  Wages  are 
generally  taxed  significantly  more  than  other 
issues  related  to 
forms  of 
fairness,  this  creates  incentives  to  engage  in  tax 
arbitrage.  The  under-taxation  of  some  types  of 

income.  Besides 

Table A19.1: Taxation indicators 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average 
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the Data on 
Taxation webpage, https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823.  
Source: European Commission, OECD. 

72 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)28.330.230.832.237.939.940.040.6Labour taxes (as % of GDP)14.115.415.816.220.020.721.320.9Consumption taxes (as % of GDP)11.211.311.511.910.811.110.711.2Capital taxes (as % of GDP)2.93.53.54.27.18.18.08.5Total property taxes (as % of GDP)0.70.30.30.31.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.40.30.30.31.11.21.21.1Environmental taxes as % of GDP1.81.91.91.92.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)36.931.829.931.029.333.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)40.637.737.137.638.241.040.139.939.739.7Corporate income tax - effective average tax rates (1) (*)13.713.713.719.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)6.25.86.87.48.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)4.812.131.640.7VAT Gap (% of VAT total tax liability, VTTL)20.919.311.09.1LithuaniaEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
      
 
 
 
 
 
 
 
 
 
 
Graph A19.1: Tax revenues from different tax types, % of total revenue 

Source: European Commission 

income also contributes to Lithuania’s low overall 

income  tax  revenues  and  reduces  the  fiscal  and 
policy  scope  to  reduce  Lithuania’s  high  level  of 
income  inequality.  The  average  forward-looking 
effective  corporate 
is  also 
significantly below the EU average. A reduced rate 
tax  system  for  small  firms  that  is  based  on 
turnover 
than  profits  has  distortive 
threshold  effects  that  encourages  firms  to  limit 
their growth or under-declare their income. 

income  tax  rate 

rather 

Graph A19.2: Tax wedge for single and second 
earners, % of total labour costs, 2022 

Note: Second earner tax wedge assumes first earner at 100% 
of the average wage and no children. For the methodology of 
the tax wedge for second earners see OECD (2016) “Taxing 
Wages 2014-2015”. 
Source: European Commission 

Lithuania’s  labour  tax  burden  is  lower  than 
the EU average and slightly less progressive. 
Graph A19.2 shows that the labour tax wedge for 
Lithuania in 2022 was lower than the EU average 
for  single  people  earning  50%  of  the  average 
wage, and significantly lower than the EU average 
at  higher  levels  of  income.  The  special  tax 

73 

treatment  of  some  types  and  sources  of  income 
further reduces the overall progressivity of the tax 
system. Second earners at a wage level of 67% of 
the  average  wage,  whose  spouses  earn  the 
average  wage,  are  subject  to  a  lower  tax  wedge 
than the EU average. As part of its RRP, Lithuania 
has  published  an  OECD-prepared  assessment  of 
the  effectiveness  of  the  tax-benefit  system  in 
preventing  poverty  and  reducing  inequality.  It  has 
also made a commitment to following this up with 
relevant  reforms  to  the  personal  taxation  and 
social security systems. 

to 

and 

acted 

Its  RRP 

EUR 5 000 

Lithuania is improving its tax administration 
and  low  tax  compliance. 
includes 
measures  to  enhance  tax  administration  by 
improving  data  analytics,  developing  IT  tools, 
developing  staff  competences,  and  limiting  cash 
transactions  to  shrink  the  shadow  economy. 
Lithuania  recently  prohibited  cash  payments  of 
over 
improve 
transparency  and  tax  compliance  in  the  sale  of 
used  vehicles. 
its  tax 
It  has  also  reformed 
including  through  digitalisation 
administration, 
projects.  Tax  arrears  increased  significantly  by 
7.3 pps  in  2020  to  12.1%  of  total  net  revenue. 
This 
the  EU-27 
average  of  40.7%,  although  that  average  is 
distorted  by  very  large  values  in  a  few  Member 
States.  The  VAT  gap  (the  gap  between  revenues 
actually  collected  and  the  theoretical  tax  liability) 
remains  relatively  large  in  Lithuania  at  19.3% 
(more  than  double  the  EU  average  of  9.1%), 
though it has been gradually decreasing. Lithuania 
has  the  lowest  on-time  filing  rate  of  corporate 
income  tax  returns  among  EU  Member  States  for 
which this data is available.  

remains  significantly  below 

29.333.838.240.633.820253035404550100150Tax wedge, % of total labour costsEarnings in % of the average wageSingle earner - LTSingle earner - EU averageSecond earner -  LTSecond earner -  EU average51.4327.5421.0150.2536.8012.97Tax revenue shares in 2021, Lithuania (outer ring) and the EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital5.104.320.381.000.290.190.902.640.142.7501234567Lithuania -environmentaltaxationEU -environmentaltaxationLithuania -property taxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Lithuania and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
   
     
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

74 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)8.2-0.43.50.06.01.90.52.7Potential growth (y-o-y)6.21.82.64.14.53.52.92.6Private consumption (y-o-y)11.0-2.23.7-2.48.00.50.13.1Public consumption (y-o-y)2.9-0.70.1-1.40.90.50.50.2Gross fixed capital formation (y-o-y)17.2-6.86.8-0.27.82.62.74.5Exports of goods and services (y-o-y)10.67.36.10.417.011.91.94.8Imports of goods and services (y-o-y) 15.72.15.7-4.519.912.32.04.9Contribution to GDP growth:Domestic demand (y-o-y)11.8-3.53.7-1.86.50.90.72.8Inventories (y-o-y)0.1-0.1-0.5-1.8-0.20.70.0-0.1Net exports (y-o-y)-3.72.80.33.5-0.30.2-0.10.1Contribution to potential GDP growth:Total Labour (hours) (y-o-y)-0.1-0.70.30.41.20.90.40.1Capital accumulation (y-o-y)2.71.11.41.61.81.71.61.6Total factor productivity (y-o-y)3.61.41.02.11.50.90.80.9Output gap4.8-4.41.6-0.31.1-0.5-2.7-2.6Unemployment rate7.313.28.48.57.16.06.66.5GDP deflator (y-o-y)6.23.32.01.96.316.810.43.1Harmonised index of consumer prices (HICP, y-o-y)3.34.71.41.14.618.99.22.2HICP excluding energy and unprocessed food (y-o-y)2.43.52.02.53.213.69.93.0Nominal compensation per employee (y-o-y)15.22.67.16.611.910.610.46.2Labour productivity (real, hours worked, y-o-y)6.12.52.46.13.1-3.30.72.0Unit labour costs (ULC, whole economy, y-o-y)6.80.64.74.96.814.09.13.1Real unit labour costs (y-o-y)0.6-2.72.73.00.5-2.4-1.20.0Real effective exchange rate (ULC, y-o-y)4.4-1.53.30.76.29.62.8-0.6Real effective exchange rate (HICP, y-o-y)1.11.90.81.51.87.9..Net savings rate of households (net saving as percentage of net disposable income)-0.90.1-2.59.12.2...Private credit flow, consolidated (% of GDP)16.6-1.32.60.35.9...Private sector debt, consolidated (% of GDP)56.972.155.754.353.9...of which household debt, consolidated (% of GDP)17.428.022.424.223.6...of which non-financial corporate debt, consolidated (% of GDP)39.444.033.330.230.4...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)0.711.94.51.30.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)-8.06.16.011.72.6-3.51.82.1Corporations, gross operating surplus (% of GDP)33.435.634.831.631.733.034.234.0Households, net lending (+) or net borrowing (-) (% of GDP)-0.30.1-2.84.31.0-0.1-0.10.2Deflated house price index (y-o-y)18.1-9.94.36.111.00.3..Residential investment (% of GDP)2.52.52.73.23.03.6..Current account balance (% of GDP), balance of payments-10.3-3.20.97.31.1-5.1-0.90.1Trade balance (% of GDP), balance of payments-9.4-3.51.89.34.5-2.0..Terms of trade of goods and services (y-o-y)1.8-0.30.61.5-5.2-7.44.40.6Capital account balance (% of GDP)1.33.32.11.71.41.5..Net international investment position (% of GDP)-47.0-56.5-39.3-15.7-7.4-6.7..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-15.4-25.6-9.415.122.321.5..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)51.271.668.270.669.659.4..Export performance vs. advanced countries (% change over 5 years)73.939.510.039.544.2...Export market share, goods and services (y-o-y)6.54.42.38.93.47.7-0.71.0Net FDI flows (% of GDP)-3.9-1.1-1.1-1.1-2.2-2.5..General government balance (% of GDP)-0.7-6.2-0.3-6.5-1.2-0.6-1.7-1.4Structural budget balance (% of GDP)..-0.9-6.4-1.6-0.4-0.6-0.3General government gross debt (% of GDP)17.431.138.646.343.738.437.136.6forecast 
 
 
 
      
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

appears  ambitious  compared  with  past  fiscal 
performance.  At  the  same  time,  the  baseline 
projections  up  to  2033 benefit  from  a  favourable 
(although declining) snowball effect, with real GDP 
growth  averaging  2.1%  in  2025-2033.  Gross 
financing  needs  are  expected  at  around  4%  of 
GDP for most of the projection period. 

The  baseline  projections  are  stress  tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph  1).  For  Lithuania,  reverting  to  historical 
fiscal  trajectories  under  the  ‘historical  structural 
primary  balance  (SPB)’  scenario  would  lead  to  a 
higher government debt ratio. If the SPB gradually 
converged  to  a  deficit  of  1.3%  of  GDP  (its 
historical 15-year average), the projected debt-to-
GDP  ratio  would  be  44%  in  2033,  11  pps.  above 
the  baseline.  A  permanent  worsening  of  the 
macro-financial  conditions,  as  reflected  under  the 
‘adverse interest-growth rate differential’ scenario 
(i.e. 1 pp. higher than the baseline) would result in 
a  debt-to-GDP  ratio  about  3  pps.  higher  than  the 
baseline  projection.  A  temporary  worsening  of 
financial  conditions,  as  captured  by  the  ‘financial 
stress’ scenario, results in a debt projection similar 
to  the  baseline.  The  same  holds  for  the  ‘lower 
structural primary balance (SPB)’ scenario (i.e. SPB 
the 
level  permanently 
cumulative forecast change).  

reduced  by  half  of 

low  risks 

Additionally,  stochastic  debt  projections 
(Graph  2). (106)  These 
indicate 
stochastic  simulations  point  to  a  34%  probability 
of  the  debt  ratio  in  2027  being  greater  than  in 
2022,  entailing  low  risk  given  the  initial  low  level 
of  debt.  In  addition,  such  shocks  point  to  some 
uncertainty  (i.e.  the  difference  between  the  10th 
and 90th debt distribution percentiles) surrounding 
the government debt baseline projections. 

This  Annex  assesses  fiscal  sustainability 
risks  for  Lithuania  over  the  short,  medium 
and  long  term.  It  follows  the  same  multi-
dimensional 
European 
Commission’s  2022  Debt  Sustainability  Monitor, 
updated  based  on  the  Commission  2023  spring 
forecast. 

approach 

the 

as 

1  -  Short-term  risks  to  fiscal  sustainability 
are 
low  overall.  The  Commission’s  early-
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  A21.2). (103)  Gross 
financing  needs  are  expected  to  remain  low  at 
around 5% of GDP in the short term (2023-2024), 
considerably below the recent peak in 2020 (Table 
1  of  Table  A21.1).  Financial  markets’  perceptions 
of sovereign risk are positive, as confirmed by the 
ratings of the main agencies. 

2 - Medium-term risks to fiscal sustainability 
are low overall.   

The  baseline  DSA  for  Lithuania  shows  that 
the government debt ratio is projected to de-
cline  over  the  medium  term,  to  around  33% 
of GDP in 2033 (Graph 1). (104) (105) The assumed 
structural  primary  balance  (a  surplus  of  0.3%  of 
It 
GDP)  contributes 

these  developments. 

to 

(103) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(104) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary surplus, before ageing costs, of 0.3% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10 (as 
for all Member States); (iv) real GDP growth rates from the 
Commission 2023 spring forecast until 2024, followed by 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10, i.e. for 2025-2033 (on average 2.1%); (v) ageing costs 
in line with the 2021 Ageing Report (European Commission, 
Institutional Paper 148, May 2021). For information on the 
methodology, see the 2022 Debt Sustainability Monitor 
(European Commission, Institutional Paper 199, April 2023). 

(105) Table 1 shows the baseline debt projections and its 

(106) These projections show the impact on debt of 2000 different 

breakdown into the primary balance, the snowball effect (the 
combined impact of interest payments and nominal GDP 
growth on the debt dynamics) and the stock-flow 
adjustment.  

shocks affecting the government’s primary balance, 
economic growth, interest rates and exchange rates. The 
cone covers 80% of all simulated debt paths, therefore 
excluding tail events. 

75 

 
 
 
 
                                                 
 
 
 
                                                 
 
 
Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  the 
one hand, risk-increasing factors include the recent 
increase  in  interest  rates,  and  the  relatively  large 
share of public debt held by non-residents. On the 
one  hand,  risk-mitigating  factors  include  the  fact 
that debt is fully denominated in euro and the low 
share of short-term debt in total debt. In addition, 
the structural reforms under the NGEU/RRF, if fully 
implemented, could have a further positive impact 
on GDP growth in the coming years, and therefore 
help to mitigate debt sustainability risks. 

3  -  Long-term  risks  to  fiscal  sustainability 
are low overall. (107)  

The  S2  sustainability  gap  indicator  (at  1.2 pps.  of 
GDP) points to low risks, suggesting that Lithuania 
would  need  to  improve  its  structural  primary 
balance  only  to  a  limited  extent  to  ensure  debt 
stabilisation  over  the  long  term.  This  required 
effort  results  from  the  projected  increase  in 
ageing costs (1.3 pps.), in particular for health care 
and long-term care (Table 2).  

Given  low  long-term  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term risks are assessed as low. Indeed, the S1 
sustainability  gap  indicator  signals  that  a  small 
consolidation  effort  of  0.6  pp.  of  GDP  would 
suffice to bring debt to 60% of GDP by 2070. This 
result  is  driven  by  the  projected  rise  in  ageing 
costs  (1.4 pps.  of  GDP),  with  the  current  low  debt 
level  (-0.4 pp.)  and  favourable  budgetary  position 
(-0.4 pp.) reducing the required effort (Table 2). 

(107) The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

76 

 
                                                 
Table A21.1: Debt sustainability analysis - Lithuania 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Lithuania 

Source: Commission services. 

77 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallLOWLOWLOWLOWLOWLOWDebt level (2033), % GDP33.244.534.235.833.4Debt peak year20222033202220222022Fiscal consolidation space16%55%20%16%16%Probability of debt ratio exceeding in 2027 its 2022 level34%Difference between 90th and 10th percentiles (pps. GDP)28.0(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)Thedifference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWLOWLOWLOWLOWTable 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)46.343.738.437.136.635.534.433.332.832.532.532.632.833.2Changes in the ratio10.5-2.6-5.3-1.3-0.5-1.1-1.1-1.1-0.5-0.3-0.10.10.20.4of whichPrimary deficit5.80.70.31.30.70.50.30.10.30.40.50.70.80.9Snowball effect0.0-4.8-6.6-3.3-1.4-1.6-1.4-1.2-0.8-0.7-0.6-0.5-0.5-0.5Stock-flow adjustments4.61.51.10.80.20.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)15.36.05.25.74.84.44.13.83.94.04.24.34.44.6S1S2Overall index  (pps. of GDP)0.61.2of which Initial budgetary position-0.4-0.1Debt requirement-0.4Ageing costs1.41.3of which    Pensions0.60.2     Health care0.40.5     Long-term care0.40.6Others0.00.0Table 2. Breakdown of the S1 and S2 sustainability gap indicators0510152025303540455020202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p90010203040506020202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaseline 
 
 
 
 
 
   
 
 
   
 
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX  

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Lithuania (108).  
Lithuania  was  selected  for  an  in-depth  review  in 
the  2023  Alert  Mechanism  Report.  This  in-depth 
review  on  the  prevention  and  correction  of 
macroeconomic  imbalances  presents  the  main 
findings  on  the  gravity  and  evolution  of  the 
challenges  identified,  as  well  as  policy  responses 
and potential policy needs. Findings cover all areas 
of vulnerability assessed in the in-depth review.  

in 

In  Lithuania,  vulnerabilities  relating  to  price 
competitiveness,  external  balances  and 
house price developments are increasing but 
seem  to  be  contained.  Household  savings 
increased  during  the  COVID-19  lockdown  and 
reached  record  levels  in  2020,  which  boosted 
consumption  and  housing  purchases 
the 
following  years.  This  together  with  increases  in 
construction  costs  and  a  temporary  COVID-19- 
related slowdown of housing supply growth, led to 
house price growth picking up significantly in 2021 
and  accelerating  further  in  2022.  The  recent 
energy  and  commodity  price  shocks 
raised 
production  costs  and  pushed  up  core  inflation. 
Wage  growth  has  been  relatively  rapid  over  the 
last  decade,  helped  by  catching  up  effects  and 
labour  shortages.  As  wages  have  been  growing 
faster  than  productivity,  this  led  to  a  gradual 
increase  in  unit  labour  costs  (ULCs)  and  an 
appreciation  of  REERs.  As  a  result  of  all  these 
factors,  Lithuania  experienced  one  of  the  highest 
levels  of  HICP  inflation  in  the  EU  and  significant 
inflation  differentials  with  respect  to  the  EA  in 
2022.  On  the  other  hand,  export  market  shares 
have  held  up  well  and 
in  Lithuania’s  main 
exporting  sectors  (such  as  manufacturing),  profits 
have continued to grow and domestic factors have 
not  affected  export  prices  yet  to  a  great  extent. 
The  recent  deterioration  of  Lithuania’s  current 
account  was  driven  almost  exclusively  by 
increasing  prices  of  energy  imports;  and  the 
current  account  is  projected  to  return  to  positive 
territory  by  2024.  Lithuania’s 
international 
investment  position  (NIIP)  continued  its  decade 
long  improving  trend,  reaching  -6.7%  of  GDP  in 
2022. Overall, there are no signs of relevant house 
rate 
prices  and 

exchange 

effective 

real 

(108)  European Commission (2023), In-Depth Review for 

Lithuania, Commission staff working document (COM(2023) 
637 final),  in accordance with Article 5 of Regulation (EU) No 
1176/2011 on the prevention and correction of 
macroeconomic imbalances.  

78 

overvaluations. While the current account recorded 
values  below  those  suggested  by  economic 
fundamentals, 
the 
fundamental threshold. 

the  NIIP  was  close 

to 

is 
Going  forward,  house  price  growth 
expected to slow down and external balances 
to  improve  with  the  energy  prices  coming 
longer-term  structural 
down,  while  the 
drivers  of  increasing  ULCs  are  expected  to 
persist. House price growth is likely to undergo a 
period of moderation, given the interest rate rises 
and  the  economic  slowdown  underway.  This 
adjustment is likely to slow down construction and 
private  consumption.  However,  risks  of  a  sudden 
disorganised  adjustment  on  the  housing  market 
are  considered  low,  as  the  household  debt  is 
relatively  low  and  the  financial  sector  is  well 
capitalised,  highly  profitable  and  benefits  from 
currently  low  levels  of  non-performing  loans. 
Lithuania’s current account balance is projected to 
gradually  recover  as  energy  prices  decrease  to  -
0.9%  of  GDP  in  2023  and  0.1%  in  2024.  Given 
Lithuania’s  sound  stock  position,  Lithuania  has  a 
buffer  to  absorb  even  several  years  of  moderate 
current account deficits without  the NIIP declining 
towards  prudential  thresholds.  Finally,  inflation  is 
expected to subside this year to 9.2% and to 2.2% 
in  2024,  while  ULC  growth  is  expected  to  slow 
down  to  9.1%  in  2023  and  3.1%  in  2024.  At  the 
same time, the labour market shortages which are 
putting upward pressure on wages, are expected to 
become  even  more  severe  over  the  medium  to 
long-term,  and  catching  up  effects  may  continue 
to play a role as well. 

Certain  policies  could  help to better  address 
the  identified  vulnerabilities. 
In  particular, 
Lithuania  does  not  make  full  use  of  immovable 
property  taxation,  which  could  also  dampen  real-
estate  cycles.  More  focus  on  some  specific 
structural policies could also help to manage price 
pressures,  such  as  fostering  competition  in  the 
local  energy 
domestic  market  or 
production  and  energy  efficiency.  The  issue  of 
rising  ULCs  could  be  addressed  with  either 
improving  labour  supply  (through  investments  in 
the  skills  and  health  of  the  population)  or  with 
investments  into  innovation,  thus  supporting  the 
transition to a high value-added economy. 

increasing 

Based  on  this  assessment,  the  Commission 
considered  in  its  communication  European 
Semester – 2023 Spring Package (COM(2023) 

 
 
 
                                                 
 
  
Table A22.1: Assessment of macroeconomic imbalances matrix 

Source: European Commission 

600 final) that Lithuania does not experience 
imbalances. 

79 

Gravity of the challengeEvolution and prospectsPolicy responseUnsustainable trends, vulnerabilities and associated risksHouse price growthHouse price growth was in line with income growth until 2019, accelerated in 2021 and in the first half of 2022, but since then it is slowing down. By Q4 2022, house prices are estimated to be only marginally overvalued by around 2.2%. Prices were boosted by rising incomes and low interest rates, the post-COVID economic surge (which was relatively strong in Lithuania) and increasing construction costs (especially costs of construction materials, products and machinery). Nevertheless, household debt is relatively low, below fundamental thresholds. House price growth is expected to slow down, given the interest rate rises and the economic slowdown underway, already reflected in a decline in transactions. This adjustment can be expected to slow down construction and private consumption. However, risks of a disorderly adjustment are considered low, as the household debt is relatively low, and the financial sector is well capitalised, highly profitable and benefits from currently low NPLs.Some policy measures could be considered in response to the recent house price increase. Bank of Lithuania introduced a requirement for financial institutions to have a 1% countercyclical capital buffer starting from October 2023.  Furthermore, in 2022 a loan-to-value ratio has been reduced to 70% for second and subsequent housing loans. However, Lithuania does not make full use of immovable property taxation, which could dampen real-estate cycles.External sustainabilitySince the financial crisis of 2008, Lithuania’s current account has remained broadly in balance, with a significant swing into surplus during the pandemic (2019-21). The current account deficit of -5.1% in 2022 is mostly related to high energy prices, which translated into higher energy imports in value terms. However, Lithuania's net international investment position (NIIP) is only slightly negative at -6.7% of GDP in 2022 and it is positive (at 21.5%) if non-defaultable instruments are excluded.In 2023-2024 the current account balance is expected to gradually improve to -0.9% and +0.1% of GDP respectively, helped by the decline in energy prices. Given Lithuania’s sound stock position, Lithuania has a buffer to absorb even several years of moderate current account deficits without the NIIP declining towards prudential thresholds.Steps to increase the country’s energy independence and energy efficiency could help to reduce external sectors’ vulnerabilities. Should energy price compensation measures be reactivated, they should be more targeted and preserve the price signal to reduce energy demand and increase energy efficiency.Cost competitiveness/ULCHICP inflation was in check prior to 2022, but has since surged, to 18.9% in 2022, well above the EA and EU average. This increase not only reflected energy price increases, but also domestic factors. Over the past decade, the core inflation-based REER (compared to 42 main trading partners) appreciated by roughly 13% and Lithuania’s ULC growth was very high, at 5.9% annually on average, compared to an EU average of 1.6%. Wage growth was also above a benchmark of economic fundamentals. Nevertheless, Lithuania has been steadily gaining export market share since 2016, with exports continuing to grow not only in value but also in volumes.Lithuania’s inflation differential to the euro is estimated not to pose an immediate risk to its cost competitiveness. HICP inflation is estimated to decrease to 9.2% in 2023 and to 2.2% in 2024, helped by the decline in energy prices. ULC growth is expected to moderate from 14.0% in 2022 to 9.1% in 2023 and 3.1% in 2024. As yet, export market shares and profits in the tradables sector have been holding up quite well, suggesting that the export sector still has room to absorb some ULC growth.Policy actions related to improving competition in the domestic market, and increasing local energy production and energy efficiency, could help to ease price pressures. The issue of rising ULCs could be addressed with either improving labour supply (through investments in the skills and health of the population) or with investments into innovation, thus supporting the transition to a high value-added economy.