COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Lithuania Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Lithuania
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Lithuania, budget policy, economic policy, economic recovery, economic reform, employment policy, investment, macroeconomics, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  SWD(2026) 215 final  COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Lithuania Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Lithuania {COM(2026) 215 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

paid out. From 1 January 2026, participation in 
the  second  pillar  of  the  Lithuanian  pension 
scheme  became  voluntary.  Participants  may 
withdraw  their  funds  over  a  two-year  period, 
until  31 December 2027.  It  is  expected  that 
withdrawal  of  these  funds  will 
lead  to 
increased  consumption  in  the  short  run.  The 
effect  of  the  pension  reform  will  decline  in 
2027,  and  given  a  large  base,  GDP  growth  is 
expected to decline to 2.1%. HICP (harmonised 
index  of  consumer  prices)  inflation  increased 
from  0.9%  in  2024  to  3.4%  in  2025,  due  to 
large  price increases  for  food  and  services.  In 
2026, HICP inflation is expected to reach 4.4%, 
driven  primarily  by  rising  fuel  and  services 
prices,  followed  by  a  slowdown  to  2.7%  in 
2027. 

Graph 1.1:  Real GDP growth and contributions 

Source: AMECO 

Unemployment declined to 6.9% in  2025, 
down  from  7.1%  in  2024,  but  structural 
mismatches 
remain.  Economic  growth 
contributed  to  a  decline in  the  unemployment 
rate  in  2025.  With  economic  growth  forecast 
to 
the 
unemployment  rate  is  expected  to  decline 
further  over  the  same  period  (to  6.7%). 
However,  the  job  vacancy  rate  has  been 
hovering  around  2-2.3%  since  2024  and  has 
shown no signs of coming down, which, along 

in  2026  and  2027, 

continue 

The Lithuanian economy continues 
to grow, but challenges persist 

by 

supported 

In  2025,  Lithuanian  GDP  growth  was 
growth 
strong, 
in 
relatively  small 
consumption.  Following 
economic  growth  in  2023  (0.7%),  growth 
picked up to 3.0% in 2024 and 2.9% in 2025, 
as  wages  continued  to  rise  and  private 
consumption rebounded (Graph 1.1). Consumer 
confidence (1)  declined  in  comparison  with 
2024; nevertheless, it remained positive (1.4 in 
December 2025). Savings are historically high, 
at  9.7%  of  gross  disposable  income  in  2025, 
compared  to  relatively  low  savings  in  2023-
2024  (5.7%-7.6%),  likely  due  to  uncertainty 
and  geopolitical  risks.  After  falling  by  1.7%  in 
2024, investment grew by 8% in 2025, driven 
mainly  by  spending  on  equipment  and 
machinery. Foreign direct investment (FDI, net 
inflows) is increasing: it stood at 3.4% of GDP 
in 2022, 4.8% in 2023, and 5.5% in 2024 (by 
comparison, it stood at 8.1% in 2020).  

is  expected  to 
Lithuania’s  economy 
continue to grow and inflation is likely to 
remain  high  over  the  forecast  horizon. 
Growth is expected  to be supported by robust 
private  consumption,  resilient  investment,  and 
buoyant  exports.  However,  trade  tensions  and 
the  uncertainty  they  create,  in  addition  to 
existing  geopolitical  risks  for  the  Baltics,  are 
weighing  on  economic  growth.  The  conflict  in 
the  Middle  East  has  raised  energy  prices, 
increasing the marginal cost of production and 
thereby  weighing  on  economic  growth. 
Nevertheless, in 2026, real GDP is expected to 
grow  by  3.0%,  mainly  due  to  increasing 
consumption  as  second-pillar  pensions  are 

(1)  Lithuania Consumer Confidence Indicator (I:LCCISM). 

2 

-6-4-20246818192021222324252627Net exportsInvestmentPriv. consumptionGov. consumptionInventoriesReal GDP (y-o-y%)forecastpps.  
 
 
     
with some persistent unemployment, points to 
labour  market  mismatches  (see  Section  4). 
According  to  the  2025  European  Investment 
Bank  Investment  Survey,  71%  of  firms  still 
cited the availability of skilled staff as a long-
term  barrier  to  investment,  although  this 
percentage has declined since 2024 (76%). 

(3) 
government  expenditure  on  defence 
amounted  to  2.5%  of  GDP  in  2024,  2.7%  in 
2025,  and  is  forecast  by  the  Commission  to 
increase  to  2.9%  in  2026,  and  3.5%  in  2027 
(Annex  2).  Investment  in  defence  is  also 
receiving  support  from  EU  funds.  As  part  of 
the  ReArm  Europe  Plan,  Lithuania  has 
requested  EUR 6.4 billion 
loans  under 
Security Action for Europe (SAFE). 

in 

Rising public-spending needs 
increase pressure on public 
finances 

Growing  public  expenditure  needs  are 
expected  to  weigh  on  Lithuania’s  public 
finances  in  the  medium  term.  Although 
Lithuania  has  one  of  the  lowest  public  debt 
levels in the EU, it also has comparatively low 
levels  of  public  expenditure  and  revenue. 
Public spending is projected to increase due to 
population  ageing,  with  an  expected  rise  in 
long-term  care 
pension,  healthcare  and 
expenditure (see Annex 2). Additional spending 
pressures  are  expected 
increasing 
defence  expenditure  and  the  indexation  of 
public sector wages, pensions and other social 
benefits.  Revenue  growth 
is  expected  to 
remain  more  limited  in  comparison.  The  tax 
measures  adopted  so  far  are  insufficient  to 
in  public 
offset 
spending. As a result, the general government 
deficit  rose  from  1.3%  of  GDP  in  2024  to 
1.8%  in  2025  and  is  projected  to  reach  2.2% 
and  2.7%  in  2026  and  2027,  respectively. 
Public  debt  is  projected  to  increase  from 
38.0% of GDP in 2024 to 48.4% in 2027. 

the  projected 

increase 

from 

Expenditure  on  defence  in  Lithuania  is 
steadily  increasing,  with  additional  EU 
support.  To  facilitate  an  increase  in  public 
spending  on  defence,  the  Council  of  the 
European  Union  has  activated  the  national 
escape  clause  (NEC)  for  Lithuania (2).  Total 

(2)  The  activation  of  the  national  escape  clause  provides 
Member  States  with  budgetary  flexibility  to  increase 
defence  expenditure,  without  an  immediate  need  to 
finance  such  increase  with  spending  cuts  or  revenue-
raising  measures.  The  flexibility  thus  gives  Member 
States  the  necessary  time  to  accommodate  higher 
defence expenditure within national budgets. 

improving 

(RRP).  These 

commercial  and 

Lithuania  has  made  partial  progress  in 
addressing  the  2025  country-specific 
tax 
recommendations  on 
compliance  and  broadening  the  tax  base 
to sources less detrimental to growth (see 
Annex 3). The authorities adopted tax reforms 
with  a  net  revenue-raising  effect,  many  of 
which entered into force in January 2026 and 
are linked to commitments under the recovery 
include 
and  resilience  plan 
reforms  of 
residential 
property taxation, a gradual increase in excise 
duties,  an  introduction  of  excise  duty  on  non-
alcoholic  sweetened  beverages,  and  value 
added  tax  (VAT)  measures  with  a  net  base-
broadening  effect,  including  the  removal  of 
the  reduced  VAT  rate  on  heating.  These 
measures  contribute  to  reducing  preferential 
tax  treatments,  broadening  the  tax  base,  and 
increasing  revenues.  However,  revenue  from 
recurrent  property  and  environmental  taxes, 
to  growth, 
less  detrimental 
which  are 
continues  to  be  among  the  lowest  in  the  EU. 
The  reform  of  the  recurrent  property  tax 
provides  more  frequent  updating  of  cadastral 
the  high 
values 
exemption  threshold  for  primary  residences 
and the low progressivity of the tax rates limit 
the  reform’s  revenue  potential  (see  Annex  3). 
The  tax  system  continues  to  allow  tax 
arbitrage 
self-
employment and certain forms of incorporated 
business  (see  Annex  3).  On  tax  compliance, 
Lithuania  has  made  progress  through  the 
digitalisation  of 
tax  administration  and 
widespread  use  of  electronic  filing  and  pre-
filled  returns,  contributing  to  a  decline  in  the 
VAT  compliance  gap  to  13.2%  in  2024  (see 
Annex  3).  Nevertheless,  VAT  compliance 

to  market  prices,  but 

employment, 

between 

(3)  The  general  government  expenditure  on  defence  as 

defined by the COFOG definition. 

3 

 
 
 
Box 1: 

UN Sustainable Development Goals (SDGs) 

Lithuania performs above the EU average in SDGs related to quality of education (SDG 4), clean 
water and sanitation (SDG 6), sustainable cities and communities (SDG 11), and life below water 
(SDG 14). 

While its performance remains below the EU average, Lithuania shows progress in SDGs related 
to zero hunger (SDG 2), good health and well-being (SDG 3), affordable and clean energy (SDG 
7),  decent work and economic growth (SDG 8), industry, innovation and infrastructure (SDG 9), 
reduced inequalities (SDG 10), responsible consumption and production (SDG 12), climate action 
(SDG  13),  life  on  land  (SDG  15),  and  partnership  for  the  goals  (SDG  17).  This  progress  is 
particularly  significant  in  areas  such  as  peace,  justice  and  strong  institutions  (SDG  16)  and 
gender equality (SDG 5).  

Out of the 17 indicators, Lithuania is moving away from the targets on no poverty (SDG 1). 

challenges  persist,  and  the  shadow  economy 
remains above the EU average, with envelope 
wages as a significant issue. 

Regional disparities and risks to 
economic security are holding back 
growth 

Overall,  Lithuania  has  achieved  strong 
convergence towards the EU average GDP 
per  capita  but  disparities  within  the 
country  are  increasing.  GDP  per  capita 
reached 87% of the EU average in 2024, with 
Vilnius  County  at  133%,  Kaunas  at  86%,  and 
Klaipėda at 76% of the EU average, while the 
other  counties  remained  at  60%  or  less. 
Vilnius  and  Klaipėda  have  been  the  only 
counties  experiencing  population  growth  over 
the  last  decade  (see  Annex  18).  The  lagging 
regions  suffer  from  limited  access  to  quality 
public services, including healthcare, education 
and  social  services.  Rural  areas  continue  to 
face 
lower  educational  outcomes,  teacher 
shortages,  limited  access  to  healthcare  and 
long-term  care,  and  weaker  connectivity.  This 
undermines 
equal 
opportunities,  residents’  right  to  stay  and 
growth prospects (see Section 4).  

cohesion, 

social 

for 

legal  basis 

While  Lithuania  took  steps  to  strengthen 
intermunicipal 
the 
cooperation, 
remains 
in  practice 
limited.  Despite  some  progress  on  the  2025 
country-specific 
on 
‘addressing  regional  disparities  through  better 

recommendation 

it 

remain. 

regions’, 

intermunicipal  cooperation  and  development 
of local clusters in order to attract investments 
to 
The 
challenges 
amendments to the Public Administration Law 
adopted  at  the  end  of  2025,  enabled  joint 
public  institutions  to  administer  the  provision 
of  public  services  on  behalf  of  several 
municipalities, addressing a long-standing gap. 
in  practice  remains 
However,  cooperation 
limited  to  add-on  functions  or  to  contracting 
services  from  businesses  owned  by  other 
municipalities, 
establishing 
sustainable  shared  service  provision  across 
several  municipalities.  Broader  take-up  of 
intermunicipal 
further 
cooperation 
constrained  by  underdeveloped  cost-sharing 
arrangements,  uneven  administrative  capacity 
across  municipalities 
fiscal 
centralisation. 

rather 

than 

high 

and 

is 

to 

lack 

regions 

environment 

and 
business 

Development  of  local  clusters  to  attract 
investments 
is  another 
challenge.  Attracting  private  investment  to 
regions  outside  the  main  urban  centres 
remains  limited  due  to  disparities  in  the 
regulatory 
business 
processes, 
support 
of 
infrastructures,  and  perceived  geopolitical 
risks.  Further  barriers  to  addressing  regional 
disparities  persist:  weak  coordination  among 
ministries  on  issues  and  initiatives  related  to 
regional  and  local  development,  the  absence 
of  systematic  regional  impact  assessment  in 
legislative and decision-making processes, and 
municipalities’ 
local 
economic development. 

limited  mandate  for 

4 

 
 
the  EU, 

hindering 

challenges 

Lithuania,  as  a  country  on  the  eastern 
faces 
external  border  of 
additional 
its 
economic  and  social  development.  At  a 
national  level,  the  proximity  to  Russia  and 
Belarus include heightened security and hybrid 
threats,  pressure  on  the  economy,  weaker 
business  confidence,  loss  of  trade  flows  and 
tourism  markets,  and  declining  investment 
attractiveness.  At  a  regional 
level  these 
pressures  are  compounded  by  longstanding 
territorial  disparities  and 
the  urban-rural 
divide.  In  lagging  counties  such  as  Utena, 
Alytus,  Marijampolė  and  Tauragė,  weaker 
employment,  demographic  decline  and  poorer 
connectivity  amplify  the  impact  of  the  easter 
border  proximity.  Lithuania  therefore  faces 
challenges 
simultaneous 
strengthen 
to 
security  and 
resilience  while  sustaining 
economic  activity,  social  cohesion  and  the 
viability of rural and border areas 

increasing 

economic 

strengthen 

As  a  response, Lithuania  has  taken  steps 
security. In 
to 
February 2025, Lithuania, together with Latvia 
and  Estonia,  disconnected  from  the  Russian-
operated  electricity  system  and  synchronised 
with  the  Continental  European  Synchronous 
Area  (CESA).  This,  in  combination  with  cutting 
dependence on Russian natural gas and petrol, 
shows progress in 
energy 
independence.  However,  the  country  remains 
dependent  on  electricity 
imports,  creating 
exposure  to  external  price  fluctuations  and 
potential  supply  disruptions.  Also,  the  rapid 
is 
expansion  of  decentralised  generation 
increasing  pressure  on  distribution  grids  and 
may  create 
infrastructure  bottlenecks  for 
businesses  and  new  investments.  Electricity 
price volatility, including peak-hour spikes and 
low-price  periods,  may  pose  macroeconomic 
risks  by  affecting  inflation,  competitiveness, 
and investment signals.  

Sustaining convergence and 
competitiveness requires 
addressing structural and 
demographic pressures   

supported 

by 
integration 

convergence 
economic 
Sustaining 
requires  higher-value  activities.  Lithuania 
has  achieved  strong  economic  convergence  in 
robust 
recent 
decades, 
into 
productivity  growth  and 
European  value  chains.  As 
the  country 
approaches  higher  income  levels,  sustaining 
this  convergence  will  depend  on  shifting 
towards  higher  value-added  activities  and 
strengthening  productivity  growth,  which  has 
stagnated  recently.  Key  challenges  relate  to 
strengthening  the  innovation  ecosystem  and 
improving the transfer of research to business 
and  society,  as  business  investment  in  R&D 
remains  well  below  the  EU  average  and 
industry–science  linkages  remain  weak  in  a 
fragmented  higher-education  and  research 
landscape. 

Addressing  financial,  labour  and  green 
transition  challenges  is  key  to  improving 
competitiveness.  Access 
to  finance  for 
Lithuanian  small  to  medium-sized  enterprises 
(SMEs) remains constrained, reflecting a highly 
concentrated banking sector, firms’ reliance on 
internal  funding,  and  underdeveloped  capital 
markets.  High  drop-out  rates  and  declining 
enrolments  in  higher  education  as  well  as 
labour  shortages  –  in  particular  in  science, 
technology,  engineering  and  mathematics 
(STEM)  fields  –  risk  constraining  productivity. 
transition  while 
green 
Advancing 
maintaining  energy  affordability  and  security 
in  energy 
will  require  further 
infrastructure, 
and 
sustainable  transport  to  support  Lithuania’s 
long-term 
industrial 
competitiveness. 

productivity 

investment 

efficiency 

energy 

and 

the 

The  ageing  population  and  low  fertility 
rates  are  major  demographic  challenges, 
which  put  additional  pressure  on  the 
adequacy  of  public  services  and  old-age 
pensions.  While  in  recent  years,  Lithuania’s 
labour  force  has  been  supported  by migrants, 
looking 
the  demographic  prospects  are 

5 

 
particularly  worrying  as  migration  flows  have 
declined,  the  population  is  ageing,  and  the 
fertility  rate  is  one  of  the  lowest  in  the  EU 
(1.11  children  per  woman  in  2024  vs  an  EU 
average  of  1.34).  Demographic  trends  are  of 
particular  concern  in  the  districts  of  Tauragė, 
Marijampolė,  Panevėžys  and  Utena  (Graph 
1.2).  This  not  only  undermines  economic 
growth  prospects,  but  also  puts  additional 
pressure 
including 
healthcare and social services, and the old-age 
pension  system,  which  are  facing  adequacy 
issues (see Section 4 and Annex 2). In addition, 
participation 
pension 
schemes, which stood at 76% of the working-
age  population  in  2024  (EU  average:  55.9%; 
see  Annex  2)  is  expected  to  decrease,  due  to 
the  reform  of  the  second-pillar  pension 
scheme. 

supplementary 

services, 

public 

on 

in 

Graph 1.2:  Population growth in 2013-2023, NUTS-3 % 
change 

Source: Commission calculations based on Eurostat data 

Housing challenges persist despite 
policy efforts and EU funding 

Lithuania’s  housing  sector  continues  to 
face  structural  issues, 
including  poor 
housing quality, slow renovation progress 
costs,  which 
rising 
and 
disproportionately 
vulnerable 
households.  Around  80%  of  dwellings  were 

housing 

affect 

built  before  1993  under  lower  construction 
standards,  and  housing  amenities  remain 
below  the  EU  average,  with  5%  of  dwellings 
lacking a flush toilet and 5.5% lacking a bath 
or  shower  in  2023  (EU  averages:  1.8%  and 
1.7%).  Energy  efficiency  is  also  low,  with 
around  three  quarters  of  multi-apartment 
buildings  and  60%  of  single-family  homes 
having  poor  energy  performance,  contributing 
to  high  heating  costs  and  energy  poverty. 
Government-supported 
renovation 
programmes,  financed  through  EU  cohesion 
policy and the Recovery and Resilience Facility, 
loans  and 
provide  grants, 
technical  assistance,  but 
implementation 
remains  slow,  with  only  around  300  buildings 
renovated  annually  due  to  administrative 
bottlenecks,  skills  shortages  and 
limited 
municipal  capacity.  At  the  same  time,  the 
increase in VAT on heating and hot water from 
9%  to  21%  and  an  increase  in  energy  prices 
due to the conflict in the Middle East in 2026 
are  expected  to  further  increase  the  housing 
(4)  and  exacerbate 
cost  overburden  rate 
affordability  pressures,  particularly  for  low-
income  households  living  in  poorly  insulated 
homes (see Annex 16). 

low-interest 

funding 

instruments 

competitiveness, 

EU 
provide 
considerable  resources  to  Lithuania.  They 
support investments and structural reforms to 
environmental 
increase 
sustainability,  skills,  social 
fairness  and 
security,  while  helping  to  address  challenges 
identified in the CSRs. Key instruments include 
the  Recovery  and  Resilience  Facility  (see  Box 
2)  and  Cohesion  policy  funds  (see  Box  3).  In 
addition, the Common Agricultural Policy (CAP) 
provides  Lithuania  with  an  EU  contribution  of 
EUR 4 billion under the CAP strategic plan for 
2023-2027 (5). A further EUR 518.8 million are 
available  under  the  Asylum,  Migration  and 
Integration  Fund  (AMIF),  together  with  the 
Instrument 
Border  Management  and  Visa 

(4)  This indicator should be read together with the tenure 
structure (homeowner, tenants), that may differ across 
country and regions. 

(5)  An overview of Lithuania’s formally approved strategy 
to implement the EU’s common agricultural policy 
nationally can be found at 
https://agriculture.ec.europa.eu/cap-my-country/cap-
strategic-plans/lithuania_en  

6 

 
 
 
Box 2: 

Key achievements of the Recovery and Resilience Plan 

The  Recovery  and  Resilience  Plan  (RRP)  of  Lithuania  represents  a  total  envelope  of 
EUR 3.841 billion, corresponding to 5.22% of 2023 GDP. It aims to support reforms 
and investments contributing to the green and digital transitions,  strengthen economic 
resilience,  and  address  long-standing  structural  challenges  identified  in  the  European 
Semester.  

As  of  5  May  2026,  EUR 2.7 billion  (around  70%  of  the  total  allocation)  had  been 
disbursed  to  Lithuania  following  the  satisfactory  fulfilment  of  111  milestones  and 
targets. Implementation has progressed steadily, with a growing number of reforms and 
investments already completed and delivering tangible results on the ground. 

Highlights and impact of the plan 

•  Securing  energy  independence.  The  installation  of  200 MW  of  electricity 
storage  capacity  helped  to  ensure  the  security  and  stability  of  energy  supply 
during  the  synchronisation  of  the  Lithuanian  grid  with  continental  Europe  in 
February 2025. 

•  Reorganisation  of  the  school  network.  Legislative  amendments  set  new 
requirements  for  municipalities  regarding  school  size,  the  operation  of  joint 
classes, reorganisation procedures, and funding. These amendments are part of 
a wider effort to modernise and improve the quality of general education. 

•  Millennium  School  Programme.  This  flagship  initiative  in  Lithuania  targets 
150 schools across 80% of municipalities and aims to reorganise infrastructure 
and improve teacher competences. As of late 2024, 270 schools were involved 
in the programme. 

•  Green  industrial  transformation.  A  dedicated  financial  instrument  provides 
EUR 850 million in loans to businesses to develop green and high value-added 
technologies for industrial development. 

•  Expansion of renewable energy. Nearly EUR 550 million in loans is directed 
towards  private  entities  for  the  development  of  solar  and  wind  power  plants, 
and  installation  of  energy  storage  facilities,  complemented  by  REPowerEU 
reforms  to  improve  the  investment  environment  for  renewable  energy 
developers. 

•  Digital  and  health  infrastructure.  The  plan  prioritises  the  roll-out  of  5G 
networks,  the  digitalisation  of  public  administration,  and  the  improvement  of 
healthcare  services,  notably  by  setting  up  health  centres  in  municipalities  and 
the infectious disease clusters.  

• 

Improved  tax  compliance.  Lithuania  capped  cash  payments  at  EUR 5 000, 
which will help curb the shadow economy. 

(BMVI)  and  the  Internal  Security  Fund  (ISF). 
Other 
support 
instance 
competitiveness 

also 
in  Lithuania,  for 

programmes 

EU 

through  open  calls  under  Horizon  Europe  and 
the Connecting Europe Facility. 

7 

 
 
Box 3: 

Contribution of cohesion policy funds 

EU  cohesion  policy  funding  is  supporting  Lithuania’s  efforts  to  boost 
competitiveness, environmental sustainability, skills and social fairness. In the 
2021-2027  programming  period,  EU  cohesion  policy  funds (6)  are  providing 
EUR 6.3 billion (amounting to EUR 6.9 billion paired with national co-financing), or 8% of 
2024 GDP, to Lithuania. This makes cohesion policy one of the main sources of public 
investment in the country. The value of selected projects corresponded to 95.3 % of the 
total allocation as of March 2026, with additional calls for projects in the pipeline. 

• 

Innovation, business environment and productivity.  Over EUR 1.3 billion 
is allocated for research and innovation, SME competitiveness, and regions most 
affected by the transition away from  carbon-intensive activities. Around 4 200 
firms have already seen their projects approved.  

•  Decarbonisation, energy affordability and sustainability. EUR 1.7 billion 
is  dedicated  to  improving  energy  efficiency  in  housing,  public  buildings, 
industrial  firms  and  district  heating  systems,  and  to  increasing  energy 
production  from  renewable  energy  sources  (RES).  The  number  of  consumers 
producing electricity from RES (‘prosumers’) already reached more than half of 
the 2030 national target of 300 000 prosumers. 

•  Skills, quality jobs and social fairness. Under the European Social Fund Plus 
(ESF+),  EUR 226 million 
labour  market  policies, 
is  allocated  to  active 
EUR 188 million  to  education,  including  inclusive  education  for  vulnerable 
children,  almost  EUR 178 million 
long-term  care, 
EUR 175 million  to  social  services  and  de-institutionalisation,  EUR 99 million  to 
combating  child  poverty  and  EUR 64.5 million  to  lifelong  learning.  In  addition, 
EUR 79.5 million is allocated to addressing material deprivation. 

to  healthcare  and 

The mid-term review (7) reinforced  cohesion policy’s contribution to emerging strategic 
priorities  in  Lithuania,  reallocating  EUR 619 million.  Two  thirds  of  the  reallocations 
support the defence and security industry, civil preparedness and military mobility along 
the EU’s main corridors. The mid-term review also strengthens competitiveness through 
support  for  critical  technologies,  resilience  of  water  and  energy  infrastructure  and 
development of social housing. In addition to cohesion policy funding, Lithuania will be 
allocated up to EUR 663 million under the Social Climate Fund over 2026-2032 to help 
mitigate  the  social  impact  of  the  new  emissions  trading  system  (ETS2),  supporting 
vulnerable households and small businesses.  

(6)  European Regional Development Fund, European Social Fund Plus, Cohesion Fund and Just Transition Fund. 

(7)  The mid-term review is carried out halfway through the 2021-2027 programming period. It is a formal process required 

under Article 18 of the Common Provisions Regulation that aims to assess the implementation of programmes and, where 
necessary, propose adjustments to improve their performance, ensure their relevance in light of new and emerging needs 
and keep them aligned with other EU policies. 

8 

 
 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

the  recent  economic  downturn,  as  firms 
retained  workers  in  a  structurally  tight  labour 
market.  Combined  with  a  double-digit  wage 
growth  amid  high  inflation,  this  resulted  in  a 
sharp  increase  in  unit  labour  costs  per  hour 
worked, which rose by 14.9% in 2022 and by 
12.2%  in  2023.  In  2024  and  2025,  the 
increase  in  unit  labour  costs  per  hour  was 
more  moderate:  5.6%  and  6.1%,  respectively 
(AMECO).  

Graph 2.1:  Labour productivity 

In  2025,  Lithuania  received  country-
specific  recommendations  focused  on 
(i) facilitating  investment  in  R&D  and 
supporting 
capacity, 
innovative 
(ii) reviewing  and  streamlining  existing 
tax  incentives  for  R&D,  (iii) improving 
business-science  linkages  and  optimising 
the  university  network,  (iv) incentivising 
enrolment in post-secondary education in 
technology,  engineering  and 
science, 
mathematics 
and 
(STEM) 
(v) improving access to finance for small 
(SMEs). 
to  medium-sized  enterprises 
Lithuania  has 
to 
improve  access  to  finance,  mobilise  savings 
and  expand  public  support  for  R&D  and 
innovation.  However,  overall  progress  remains 
moderate, as a key reform to streamline R&D 
tax  incentives  is  still  pending,  and  recent 
changes to the pension system may  weigh on 
the  availability  of 
investment 
capital.  Additionally,  substantial  efforts  are 
strengthen 
needed 
business-science 
increase  STEM  enrolment, 
linkages  and 
especially among women. 

taken  some  measures 

long-term 

fields 

to 

Sustaining productivity growth 
through higher value-added 
activities  

(1) Productivity level: GDP per hour worked in PPS (index, 
EU-27=100); growth rates: annual growth of real GDP 
per hour worked. 
(2) Values for the years 2025-2027 are forecasted. 
Source: AMECO 

these 

aggregate 

Behind 
trends, 
productivity  growth  varies  substantially 
across  sectors.  The  large  manufacturing 
industry (accounting for 20% of total economy 
gross  value  added)  has  been  a  key  driver  of 
productivity  growth  in  Lithuania,  with  strong 
increases  in  labour  productivity  (on  average 
6.8% per year) in the past decades (Eurostat). 
The  sectors  of  administrative  and  support 
services, 
and 
to 
professional  services  also  contributed 
aggregate productivity growth. By contrast, the 
energy  sector,  despite  strong  productivity 

construction 

transport, 

While  labour  productivity  in  Lithuania 
remains  below  the  EU  average,  the  gap 
continues  to  narrow.  At  70.4%  of  the  EU 
average in 2024, labour productivity (GDP per 
hour  worked,  in  purchasing  power  standards 
(PPS)) is comparatively low in Lithuania (Graph 
2.1). While multiple crises caused a temporary 
decline  in  hourly  productivity  in  2022  (-2.7%) 
and  2023  (-1.6%),  growth  resumed  in  2024 
(0.3%)  at  a  higher  rate  than  the  EU  average 
(0.2%). The 2022-2023 dip in productivity can 
be  partly  attributed  to  labour  hoarding  during 

9 

35404550556065707580-6-4-20246810121420002002200420062008201020122014201620182020202220242026*Index, EU=100% changeLabour productivity growth (y-o-y), LTLabour productivity growth (y-o-y), EU-27Labour productivity growth (y-o-y), EA-20Labour productivity, LT (in PPS, EU=100, rhs) 
 
      
gains,  has  seen  its  share  in  value  added 
reduced  in  the  last  two  decades,  while  labour 
productivity  in  financial  services  has  fallen 
sharply mainly due to changes in tangible non-
ICT capital. 

As  Lithuania  nears  the  income  levels  of 
more  advanced  EU  economies,  increasing 
productivity  growth  will  hinge  on  a 
continued  shift  towards  higher  value-
added activities. The proportion of medium-
high-  and  high-technology  manufacturing  in 
industrial  production  increased  from  around 
14.4%  in  1999  to  25.9%  in  2025  (1.9%  to 
5.9% 
for  high-technology  manufacturing 
alone).  At  the  same  time,  medium-low-  and 
low-technology  manufacturing  still  represent 
35.1%  and  39%  of  production,  respectively 
(2025)  (State  Data  Agency).  Moreover,  while 
the  combined  proportion  of  information  and 
communication,  financial,  and  professional, 
scientific  and  technical  services  in  Lithuania’s 
gross value added has increased from 11% to 
18%  in  the  past  decade,  exports  are  still 
dominated  by  manufacturing  (Eurostat).  This 
suggests  there  is  further  scope  to  reallocate 
resources towards higher value-added sectors, 
while  strengthening  the  role  of  knowledge-
intensive services in the export base. 

Accelerating innovation via 
stronger science-business links 
and better incentives  

and 

‘facilitating 

investment 

Lithuania  is  increasing  public  investment 
in  R&D,  but  structural  bottlenecks  limit 
private 
knowledge 
transfer.  Lithuania  continues  to  develop  its 
research and innovation system in view of the 
2025  country-specific  recommendation  (CSR) 
on 
in  R&D  and 
investment 
supporting  innovative  capacity’.  Public  R&D 
investment  is  on  track  to  meet  national 
targets,  and  new  initiatives  have  broadened 
the  policy  mix  and  expanded  support  for 
innovative firms (see Annex 4). In the last few 
years,  the  government  has  also  mandated  a 
shift  towards  more  integrated  and  effective 
R&D  financing  via  the  smart  specialisation 
strategy  (S3),  which  was  renewed  under  the 

10 

Recovery  and  Resilience  Facility  and  cohesion 
policy  and  covers  areas  such  as  life  sciences, 
photonics, 
artificial 
semiconductors, 
intelligence  and  dual-use  technologies.  To 
maximise  its  impact,  S3  could  benefit  from  a 
smaller  number  of  more 
in-depth  areas, 
anchored 
in  existing  capabilities.  Business 
investment in R&D, meanwhile, remains at less 
than one third of the EU average, as R&D tax 
incentives  remain difficult  to  access  for  SMEs 
and  innovative  firms,  commercialisation  of 
science  is  limited,  and  the  institutional  set-up 
for R&D support faces inefficiencies. 

Although  Lithuania  provides  generous 
R&D tax incentives, their uptake remains 
limited, particularly among smaller  firms 
that  are  not  yet  profitable.  In  order  to 
‘review  and  streamline  existing  tax  incentives 
for  R&D’  (2025  CSR),  a  reform  has  been 
proposed  by  the  Ministry  of  Economy  and 
Innovation  to  simplify  the  application  process 
for  tax-based  support  and  provide  ex ante 
approvals  to  companies  engaged  in  R&D 
activities  (see  Annexes  3  and  4).  If  taken 
forward, 
reduce 
administrative  barriers  for  companies  eligible 
for  the  scheme  and  provide  legal  certainty 
regarding  eligibility, 
thereby  strengthening 
incentives to engage in R&D activities. There is 
also  scope  for  Lithuania  to  fine-tune  tax 
incentives  to  better  support  young  firms  that 
are  still  loss-making,  for  example  by  making 
these  incentives  refundable  or  by  allowing 
them to be  offset  against a broader range of 
tax liabilities. 

could 

help 

this 

to 

Fragmentation  of  the  higher-education 
and  research 
landscape  continues  to 
weaken  business-science  linkages.  The 
structure of the higher-education and research 
landscape  remains  fragmented,  limiting  the 
ability  of  Lithuania  to  achieve  critical  mass 
and compete internationally on innovation. The 
2025  CSR  called  for  ‘reinforcing  institutional 
and  structural  capacity  of  higher-education 
in 
institutions 
particular  through  improving  the  university 
network  to  foster  business-science  linkages’. 
However, 
linkages  between  science  and 
industry  have  further  deteriorated,  with  the 
country  now  ranking  last  in  the  EU  in  public–
private  scientific  co-publications  relative  to 

institutes 

research 

and 

 
framework 

total  publications,  and  public  expenditure  on 
R&D financed by business enterprises standing 
at one third of the EU  average (see Annex  4).  
Lithuania  plans  to  carry  out  a  comprehensive 
performance  evaluation  of  the  entire  public 
research  base,  i.e.  universities,  colleges,  and 
research  institutes. However,  this  exercise  will 
begin  in  2028.  Building  on  the  recovery  and 
resilience plan (RRP) measure that created the 
legal 
for  potential  university 
mergers, providing  universities  with  incentives 
for  enhanced 
(including 
strategic 
and 
institutional 
consolidation  where  appropriate  could  help 
address  fragmentation,  strengthen  research 
excellence  and  enhance  business-science 
intellectual 
linkages. 
property  (IP)  regime  allows  shared  ownership 
between universities and businesses. However, 
businesses  are  not  always  aware  of  this 
science-
regime,  which  hinders 
flexible 
business cooperation.  

financial  ones) 
cooperation 

Lithuania’s 

current 

fragmentation 

Institutional 
and 
inefficiencies  continue  to 
governance 
affect  the  delivery  of  research  and 
innovation  (R&I)  support.  Despite  a  reform 
institutional 
in  the  RRP  to  optimise  the 
framework  for  delivering  public  R&I  support, 
including  the  establishment  of  the  Innovation 
Agency,  process  inefficiencies  persist  due  to 
shared  responsibilities  between  the  Research 
Council  of  Lithuania  (RCL)  and  the  Central 
Project  Management  Agency  across 
the 
funding  cycle.  Coherence  and  efficiency  could 
improved  by  strengthening  the  RCL’s 
be 
operational capacity with a view to developing 
a more integrated one-stop-shop approach for 
researchers  and 
the 
institutional set-up in the post-2027 period.  

further  adjusting 

Lithuania continues to face a shortage of 
enrolments  in  STEM  fields,  hindering  the 
country’s  innovation  capacity.  The  2025 
CSRs  for  Lithuania  highlighted  the  need  to 
‘incentivise  enrolment 
in  post-secondary 
education  in  science,  technology,  engineering 
and  mathematics  (STEM)  fields’,  given  their 
critical 
the  country's 
in  supporting 
innovative  capacity.  Despite  Lithuania  having 
tertiary  educational 
one  of 
attainment  rates  in  the  EU,  the  enrolment  in 
STEM domains is 25%, below the EU target of 

the  highest 

role 

32%,  contributing  to  a  reduced  share  of 
graduates  in  science  and  engineering  (see 
Annexes  4  and  13).  Furthermore,  there  are 
large  gender  disparities  in  the  field,  with 
women  comprising  only  27.3%  of  STEM 
students at tertiary level, compared to the EU 
average  of  32.2%.  Lack  of  enrolment  is 
intensified  by  the  rural-urban  educational 
divide, as rural students tend to perform worse 
in  mathematics  and  science,  have  limited 
access to quality education and resources, and 
show higher rates of early school leaving. Such 
disparities  exacerbate  the  ongoing  talent 
shortage within STEM areas (see Section 4). To 
address 
has 
challenge, 
continued several initiatives, such as additional 
scholarships  to  support  students  in  regions 
outside Kaunas and Vilnius. Efforts to improve 
enrolment rates and address the STEM gender 
gap would be key, as well as tackling the high 
dropout rates through  targeted measures and 
incentives. These actions could help overcome 
skills  shortages  and  strengthen  Lithuania’s 
innovative capacity and competitiveness. 

Lithuania 

this 

Improving SME financing by 
mobilising savings for investment, 
deepening capital markets and 
strengthening financial 
intermediation 

by 

including 
in 
in 

financial 
services 
financial  markets 

Lithuanian firms strongly rely on internal 
funding  and  private  equity,  and  continue 
to  face  financing  constraints.  Despite 
some  progress  on  the  2025  CSR  to  ‘improve 
access to finance for small and medium-sized 
stimulating 
enterprises 
and 
competition 
participation 
by 
facilitating the use of savings for investment’, 
Lithuanian companies rely on internal  funding 
such  as  retained  earnings  and  asset  sales  to 
finance their operations and investments more 
than  their  EU  peers.  In  2025,  51%  of  SMEs 
identified  internal  funds  as  a  primary  source, 
compared  to  an  EU  average  of  28%  (see 
Annex  6).  The  share  of  finance-constrained 
improved  to  10.4%,  yet  an  18% 
firms 
underinvestment  gap  persists,  as  many  firms 

11 

 
report insufficient investment activity over the 
last three years. 

Graph 2.2:  Lithuania continues to rely more on internal 
funding and private equity than on external financing 

Source: Eurostat (end-2024) 

industry 

Bank financing options for SMEs continue 
to  be 
limited,  due  to  high  market 
concentration  and  risk  aversion,  despite 
recovery 
in  credit  growth.  Restrictive 
lending conditions and structural inefficiencies 
continue to pose challenges for the Lithuanian 
economy.  The  banking 
remains 
among  the most  concentrated  in  the  EU,  with 
the top five institutions representing over 90% 
of the market, significantly higher than the EU 
average  of  51%.  While  the  sector  is  robust, 
boasting  a  capital  adequacy  ratio  of  22.6% 
(above  the  EU  average  of  20.2%)  and  the 
highest  liquidity  coverage  in  the  EU,  banks 
convert  a  smaller  proportion  of  deposits  into 
loans  compared  to  peers  due  to  risk  aversion 
and  structural  factors  (see  Annex  6).  Despite 
these  barriers,  credit  growth  showed  an 
upward  trend  over  2024-2025,  as  lending 
standards eased, in response to  the European 
Central 
normalisation. 
Consequently,  annual  credit  growth  for  non-
financial  corporations 
in 
November  2025.  Nevertheless,  the  ratio  of 
bank loans to GDP remains among the lowest 
in the euro area at 36.1%, compared to an EU 
these 
average 
72.5%. 
in 
challenges  by  stimulating  competition 
financial services and incentivising the banking 
liquidity 
sector  to  deploy 
towards 
remains 
essential for easing borrowing constraints and 
sustaining economic momentum. 

its  substantial 
investment 

reached  19.5% 

Addressing 

productive 

Bank’s 

policy 

of 

12 

Capital  markets  remain  underdeveloped 
despite  retail-focused  reforms.  External 
financing  is  tilted  towards  unlisted  shares, 
reflecting the dominance of private equity over 
public  listings  due  to  a  shallow  domestic 
capital  market.  The  market  capitalisation  of 
the  Nasdaq  Vilnius  Stock  Exchange  remains 
extremely  small  at 
just  6.2%  of  GDP 
(compared  to  the  EU  average  67.9%),  with 
only  25  listed  firms,  while  the  stagnant  debt 
market  continues 
to  be  dominated  by 
government  securities.  On  a  positive  side, 
corporate loan portfolios have grown, although 
they 
the 
government  bond  segment.  The  potential  for 
further  deepening 
remains 
initial 
underutilised.  Supporting  additional 
public  offerings  of  state-owned  enterprises 
could  serve  as  an 
important  catalyst  to 
improve  liquidity,  increase  the  overall  size  of 
the capital market, and broaden diversification 
opportunities for domestic investors. 

remain  modest 

the  market 

relative 

to 

for 

households, 

remains  modest, 

institutional 
Targeted  measures  and 
support aim to attract household savings 
into  the  capital  market,  though  their 
impact  on  market  depth  has  yet  to 
materialise.  The  lack  of  depth  in  the  capital 
market  results  in  limited  local  investment 
whose 
opportunities 
participation 
therefore 
limiting  the  opportunities  from  savings  for 
investments.  To  address  this,  the  government 
launched  a  new  investment  account  in  early 
2025,  aimed  at  ‘encouraging  participation  in 
financial  markets  by  facilitating  the  use  of 
savings  for  investment’  (2025  CSR).  In  line 
for  Capital  Market 
with 
Development 
national 
2023-2025, 
promotional  bank  (ILTE)  has  also  launched 
new  guarantees  for  corporate  bond  issuances 
to  bypass  collateral  constraints,  and  the 
Market 
EUR 50 million 
Acceleration  Fund.  By  investing  in  new  shares 
and  bonds,  this  joint  initiative  by  ILTE  and 
Altum  aims  to  bolster  liquidity  and  Nasdaq 
Baltic  listings  over  the  next  decade.  While 
these 
in 
broadening the range of financial instruments 
and  modern  investment  tools,  their  overall 
in  overcoming  the  historical 
effectiveness 
reliance  on  internal  financing  remains  to  be 
fully  seen  as  the  measures  continue  to 

represent  progress 

the  Guidelines 

initiatives 

Capital 

Baltic 

the 

050100150200250LTEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
   
mature, with remaining scope to provide legal 
certainty and align regulatory requirements to 
economic  realities  in  order  to  deliver  tangible 
results.  While  ILTE’s  mandate  and  capital  are 
remain  on 
expanding, 
addressing structural funding gaps and market 
failures 
support 
complements that of the commercial financial 
sector. 

focus  should 

ensure 

that 

its 

its 

to 

The  venture  capital  ecosystem  is  the 
fastest-growing in the region but remains 
reliant on public support and faces scale-
up  funding  gaps.  The  Lithuanian  venture 
capital sector continues to show strong growth 
potential,  maintaining 
its  position  as  the 
fastest-growing  start-up  ecosystem  in  the 
Baltic region. The combined enterprise value of 
local  start-ups  grew  7.1  times  between  2019 
these 
and  2024,  and 
companies  raised  EUR 220 million.  However, 
remains  small  and  heavily 
the  sector 
dependent 
co-funding,  with 
on 
government  agencies  providing  approximately 
one third  of  sourced  capital  while  private 
equity investments relative to GDP (0.3%) still 
lag behind the EU average of 0.5%.  

in  2025  alone, 

public 

the 

diverge 

The  2025  pension  reform  allowing  opt-
outs  and  withdrawals  from  private 
pension funds is likely to reduce the level 
of savings in Lithuania and could reverse 
the  fragile  progress  in  the  development 
of Lithuanian capital markets. These policy 
choices 
approach 
from 
recommended  in  the  2025  CSR  to  improve 
access  to  finance  for  SMEs  by  facilitating  the 
use of savings for investment (see Annexes  2 
and 6). Early signs of withdrawal rates indicate 
that the reform significantly reduces the stock 
of  patient  capital  (i.e.  capital  that  can  be 
invested  over  the  long  term)  managed  by 
exceeded 
pension 
EUR 10.6 billion  as  of  December  2025.  By 
eliminating 
reform 
auto-enrolment, 
undermines  the  mechanisms  for  rebuilding 
pension-fund  capital  following  withdrawals. 
According to the data collected by the Bank of 
Lithuania,  the  participation  rate  of  employees 
in the second pillar pension system decreased 
by  around  38%  during  the  first  quarter  of 
2026.  This  resulted  in  EUR  2.8  billion  being 
paid  out  to  savers  and  EUR  1.3  billion  in 

funds, 

which 

the 

pension 

reduced  already 

incentive  contributions  returned  to  Sodra, 
reducing 
funds’  assets  under 
management by approximately 41%. This has 
further 
limited  pension 
savings  (12.2%  of  GDP)  and  the  role  of 
pension  funds  as  providers  of 
long-term 
capital  and,  in  turn,  negatively  affects  access 
to  finance  for  businesses.  The  potential 
positive impact of amendments to the Law on 
Voluntary 
Supplementary 
Pension 
Accumulation  and 
the  Law  on  Pension 
Accumulation,  which  widen  the  range  of 
eligible  pension-fund  investments  (including 
unlisted company securities), has a weak basis 
to  materialise  in  the  near  term,  as  the  two-
year  withdrawal  window  is  expected  to  place 
liquidity 
funds  under  significant 
pension 
pressure.  Lithuania 
from 
reviewing 
increase 
its  pension  system  to 
investment-based  savings,  including  through 
enhanced participation mechanisms. 

could  benefit 

Modernising public procurement 
while tackling single bidding  

its 

system 

improved 

public 
Lithuania 
procurement 
through 
centralisation  and  professionalisation 
efforts;  however,  the  proportion  of 
contracts  awarded  to  single  bidders 
remains  high.  Supported  by  RRP  reforms,  in 
2025,  centralised  procurement  purchases 
accounted  for  35.9%  of  contracts  and  50.4% 
of  total  contract  value,  marking  a  substantial 
shift  from  previous  years  and  demonstrating 
the  increased  role  of  the  national  Central 
Purchasing  Body  (see  Annex  5).  Additionally, 
the  network  of  central  purchasing  bodies 
expanded  significantly,  making  procedures 
more  efficient.  In  addition,  Lithuania  made 
progress  in  moving  away  from  award  criteria 
based  on  price  alone:  the  share  of  contracts 
awarded on this basis decreased from 82% in 
2023  to  73%  in  2024.  However,  challenges 
remain as 42.3% of procurement contracts are 
awarded  following  a  single  bid,  exceeding the 
EU average of 30%. 

13 

 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

and 

fossil-fuel 

In  2025,  Lithuania  received  country-
specific  recommendations  (CSR)  focused 
on  (i) further  reducing  reliance  on  fossil 
fuels  and  imported  energy,  (ii) ensuring 
sufficient  capacity  in  and  access  to  the 
electricity  grid  and  faster  deployment  of 
renewable  energy,  (iii) making  buildings 
more  energy  efficient  to  reduce  energy 
poverty,  (iv) taking  action  to  phase  out 
non-targeted 
subsidies, 
(v) increasing  resource  productivity  to 
progress  towards  a  circular  economy, 
(vi) transforming 
decarbonising 
industrial  production  and  (vii) increasing 
the  uptake  of  public  and  sustainable 
transport. Lithuania has made some progress 
in  implementing  these  CSRs,  including  on 
renewable  energy  deployment,  grid  reforms 
and  support  for  industrial  decarbonisation. 
However,  overall  progress  remains  moderate. 
Structural  bottlenecks  continue 
to  hinder 
further reductions in fossil-fuel use and import 
challenges 
Implementation 
dependence. 
persist  in  energy  efficiency,  with  barriers 
continuing  to  slow  building  renovation  and 
energy  poverty  still  insufficiently  addressed, 
in  phasing  out  fossil-fuel 
while  progress 
subsidies  remains  limited.  At  the  same  time, 
weak  resource  productivity,  slow  progress 
towards  a  circular  economy  and  remaining 
challenges  in  industrial  transformation  weigh 
on  decarbonisation.  Structural  issues  in  the 
transport 
car 
dependency,  slow  electrification  and  limited 
further 
public 
delaying the shift to sustainable transport. 

integration,  are 

transport 

including 

sector, 

high 

In response to rising energy prices linked 
to  the  2026  crisis  in  the  Middle  East, 
Lithuania  temporarily  reduced  excise 
duties, 
released  oil  and  petroleum 
reserves  as  part  of  a  coordinated 
rail 
international  action,  discounted 
price 
tickets 

restricted 

fuel 

and 

adjustments  at  petrol  stations.  While 
these  measures  aim  to  cushion  the impact  of 
higher  energy  prices,  broad-based  measures 
such  as  fuel  tax  reductions  may  weaken 
incentives  for  energy  savings  and  fossil-fuel 
substitution.  Going  forward,  support  should 
remain  temporary  and  targeted  at  vulnerable 
households and the most exposed firms, while 
limiting  fiscal  costs  and  preserving  the  clean 
energy transition. 

Renewable energy deployment is 
advancing, but electricity-system 
constraints remain 

reduce 

Lithuania has made progress in deploying 
renewable energy and advancing reforms 
for  the  clean  energy  transition.  As 
Lithuania progresses towards the 2025 CSR to 
‘further 
reliance  on  fossil  fuels’, 
renewables  accounted  for  35.4%  of  final 
energy  consumption  in  2024,  well  above  the 
EU average of 25.2%. In the electricity sector, 
the share of renewable electricity consumption 
reached  48.9%,  exceeding  the  EU  average  of 
47.5%,  while  renewables  represented  70.6% 
of  domestic  electricity  generation  (see  Annex 
9).  This  growth  has  been  driven  by  the 
expansion of onshore wind and solar capacity. 
By  2025,  Lithuania  had  already  met  or 
exceeded most of its 2030 solar and onshore 
wind  targets,  with  further  renewable  capacity 
expansion planned through to 2030. Lithuania 
has  also  taken  steps  to  facilitate  renewable 
reforms 
energy 
and 
streamlining 
facilitating  the  development  of  renewables 
acceleration areas. 

deployment 

procedures 

permitting 

through 

Lithuania  has  reduced  its  dependence  on 
electricity  imports  in  2025  compared  to 
imports 
In  2025,  net  electricity 
2024. 

14 

 
 
of 

and 

final 

flexibility, 

electricity 
represented  30.7% 
consumption,  down  from  46.9%  the  previous 
year. This improvement is driven by increased 
capacity,  enhanced 
domestic  generation 
grid 
ongoing 
system 
infrastructure  upgrades  that  enable  better 
integration  of  renewable  energy  sources. 
However, Lithuania was still the fourth-largest 
net  importer  of  electricity  in  the  EU  in  2025, 
and  these  imports  continue  to  expose  the 
country  to  external  price  fluctuations 
in 
European  electricity  markets  and  potential 
supply  disruptions.  To  ‘further  reduce  reliance 
on  imported  energy’  (2025  CSR),  Lithuania 
plans  to  reach  renewable  electricity  self-
sufficiency  by  2028  through  offshore  wind 
capacity  in  the  Baltic  Sea.  Progress  has  been 
delayed  by  an  unsuccessful  procurement 
process  in  2025,  reflecting  adverse  market 
conditions. 

improves 

this  has 

and 
regional 

energy 
temporarily 

Lithuania  is  strengthening  the  resilience 
and  integration  of  its  electricity  system, 
domestic transmission infrastructure and 
storage  capacity.  There  has  been  some 
progress  towards  the  2025  CSR  on  ‘ensuring 
sufficient  capacity 
in  and  access  to  the 
electricity  grid  with  a  view  to  maintaining  a 
fast pace of deployment of renewable energy’. 
The 2025 synchronisation with the Continental 
European  Synchronous  Area  allows  the  Baltic 
countries  to  manage  their  electricity  systems 
frequency 
independently 
security. 
stability  and 
However, 
reduced 
Lithuania’s  electricity  interconnectivity  level 
with neighbouring Member States to 21.5%, as 
the  LitPol  Link  interconnector  with  Poland  is 
currently  dedicated  to  synchronisation  rather 
than  cross-border  trade.  Strengthening  cross-
border  connections  is  important  to  restore 
trading capacity and support system flexibility. 
Lithuania  is  developing  projects  to  strengthen 
interconnection  capabilities.  The  expansion  of 
the Kruonis pumped hydroelectric power plant 
will  bring  its  total  installed  capacity  close  to 
1 010 MW  by  the  end  of  2026.  Additional 
investments  in  storage  are  also  supported 
under Lithuania’s recovery and resilience plan. 
This  will  improve  storage  capacity  and  the 
system’s  ability  to  balance  variable  wind  and 
solar generation. 

of 

remain 

distribution 

in 
grids 

the 
However,  challenges 
capacity 
as 
decentralised  generation  continues  to 
grow.  The  number  of  prosumers  reached 
170 000  in  2025,  a  37%  increase  compared 
for  grid 
to  2024, 
increasing  demand 
connections.  Smart  meter  deployment 
is 
progressing, with 90% of businesses and 66% 
of  households  equipped,  but  the  EU  target  of 
80%  household  coverage  has  yet  to  be 
achieved. 
grid 
infrastructure will be needed to accommodate 
a  growing  decentralised  generation  capacity 
and  ensure  reliable  connections  for  both 
businesses and prosumers. 

investments 

Further 

in 

prices, 

Lithuania 

Despite  moderate  average  wholesale 
electricity 
faces 
persistent imbalances between electricity 
and gas prices and remains vulnerable to 
peak-hour  price  spikes.  In  the  first  half  of 
2025,  energy  prices  in  Lithuania  remained 
imbalanced,  with  electricity  significantly  more 
expensive  than  gas  for  both  industry  and 
households. 
In  2025,  wholesale  electricity 
prices in Lithuania  were  near  the  EU  average, 
but 
to 
significantly  higher  peak-hour  price  spikes 
(Annex 9). 

flexibility 

system 

limited 

led 

Progress on energy efficiency 
improvement remains too slow 
and energy poverty persists 

energy 

poverty’.  While 

Implementation  of  energy  efficiency 
measures,  including  renovation  of  the 
building stock, advances slowly. There has 
been  limited  progress  on  the  2025  CSR  on 
‘making  buildings  more  energy  efficient  to 
energy 
reduce 
consumption  has  declined  in  industry  (by 
12.2%  since  2019)  and,  to  a  lesser  extent,  in 
transport  (by  3.5%),  it  has  increased  in  the 
residential  (by  3.8%)  and  services  (by  1.4%) 
sectors.  In  2024,  final  energy  consumption 
increased  by  5.1%  to  5.5  Mtoe,  continuing  a 
rising  trend  observed  since  2019  and  putting 
Lithuania  off  track  to  meet  its  2030  target. 
Rising  residential  energy  use  is  driven  by  an 
expanding  housing  stock  and  a  growing  floor 

15 

 
area,  which  have  outweighed  efficiency  gains 
from  renovation  measures.  Buildings  account 
for  around  40%  of 
total  final  energy 
consumption.  Accelerating  renovations  is  thus 
key to reducing energy demand and improving 
energy  security.  Lithuania  has  scaled  up 
through 
support  for  building 
grants  and 
substantial 
Recovery and Resilience Facility (RRF) funding. 
However,  limited  access  to  financing,  labour 
shortages,  and  weak  project-development 
capacity  slow  down  implementation  and  limit 
building 
progress. 
renovation plan aims to establish a predictable 
pathway  towards  an  energy-efficient  and 
decarbonised building stock.  

renovations 
including 

national 

loans, 

draft 

The 

remain  in  place,  including  reduced  excise 
duties  on  natural  gas  used  for  heating  and 
preferential  tax  treatment  for  gas oil  used  in 
fishing 
Strengthening 
agriculture. 
incentives  for  clean  and  affordable  energy 
transition  relies  on  further  efforts  to  assess 
and  gradually  phase  out  non-targeted  fossil-
fuel subsidies. 

and 

Persistent car dependency drives 
up already high emissions, stalling 
the transition to sustainable 
transport 

Poor energy efficiency and dependence on 
fossil 
fuels  pose  an  affordability 
challenge. Energy poverty remains a concern, 
with  some  146  000  households  affected 
according  to  Lithuania’s  estimates.  Heating 
and  cooling  account  for  79%  of  residential 
final  energy  consumption.  Around  157 000 
households  still  rely  on  gas  for  heating. 
Despite  growing  adoption  of  heat  pumps, 
higher  electricity  prices,  compared  to  gas, 
to  discourage  households  from 
continue 
switching. Lithuania’s planned programmes for 
renovating  multi-apartment  buildings  and 
detached homes under the draft social climate 
plan  are  expected  to  reduce  energy  poverty. 
However, 
the 
renovation  support 
framework,  alongside 
adjustments to price signals, will be needed to 
meet  the  country’s  2030  targets  and  ensure 
that energy efficiency improvements reach the 
most affected households. 

strengthening  of 

further 

taxation, 

fossil-fuel 
in  phasing  out 
Progress 
subsidies  remains  limited.  Lithuania  has 
taken  steps  to  address  the  2025  CSR  ‘to 
phase out  non-targeted  fossil-fuel  subsidies, 
notably ones for heating’. The authorities have 
adjusted  energy 
including  by 
abolishing the reduced VAT rate for residential 
heating,  hot  water  and  firewood,  starting  in 
January 2026, and by increasing excise duties 
on  certain  fossil  fuels.  However,  a  further 
increase in these excise duties has been put on 
hold  due  to  concerns  about  cross-border  fuel 
purchases.  Several  support  measures  that 
lower  the  cost  of  fossil-fuel  consumption 

16 

of 

the 

vehicles. 

Transport  emissions  and  car  dependency 
remain  persistently  high.  Some  steps  have 
been  taken  to  address  the  2025  CSR  on 
‘increasing 
sustainable 
uptake 
transport’, but fossil-fuel-based road transport 
continues  to  dominate  Lithuania's  transport 
sector,  accounting  for  44%  of  the  country’s 
effort  sharing  emissions  in  2024,  a  41% 
increase  compared  to  2005  levels.  A  major 
reform  on  e-tolling  for  heavy  vehicles  has 
been  delayed,  hindering  the  uptake  of  green 
heavy 
is 
characterised by extreme car dependence, with 
92.1% of  passenger  journeys  made  by  car 
(Annex 8). Furthermore, not only is the number 
of  passenger  cars  increasing,  but  Lithuania’s 
fleet also remains among the oldest and most 
polluting (8). 
cleaner 
alternatives remains slow, as newly registered 
battery-electric  vehicles  accounted  for  only 
5.9% of the market in 2024, well below the EU 
average  of  13.6%  (Annex  8).  The  roll-out  of 
public  and  private  charging  stations 
is 
supported by the RRF, but the uptake of public 
stations remains low.  

transport 

adoption 

Private 

The 

of 

Efforts  to promote  sustainable  transport 
are  under  way,  but  fiscal  and  structural 
barriers are stalling the green transition. 
Through  the  RRF  and  the Modernisation  Fund, 
Lithuania  supports  the  purchase  of  electric 
vehicles. It has required all 60 municipalities to 

(8)  In 2024, over 27% of cars were at least 20 years old, 

while 63.4% remained diesel-powered. 

 
 
plans 

public 

charging 
for 
prepare 
infrastructure. However, the lack of an annual 
car  pollution  tax  remains  a  significant  hurdle 
as  the  current  one-time  registration  fee 
encourages  owners  to  keep  older,  high-
emission vehicles rather than trading them in. 
While  an 
travel-planning  and 
single-ticket  system  for  public  transport  is 
being  developed,  it  is  not  expected  until  the 
end of 2028 (Annex 8).  

integrated 

reduce 

in  2025.  This 

Efforts  to  green  and  integrate  public 
regional 
to 
transport  aim 
disparities, 
the  modal  shift 
though 
remains  slow.  While  the  RRF  and  cohesion 
policy  are  actively  supporting  the  roll-out  of 
electric  and  hydrogen  buses,  public  transport 
for  only  7.9%  of  passenger 
accounted 
journeys 
leaves  room  for 
Lithuania  to  address  the  2025  CSR  on 
‘increasing  the  uptake  of  public  transport’.  A 
key  RRF-funded  reform  of  the  inter-urban 
mobility system is currently being rolled out to 
facilitate  connectivity  between  regional  hubs. 
Its impact on passenger uptake remains to be 
seen.  The 
infrastructure  challenges  are 
compounded  by  Lithuania’s  low  population 
density  in  rural  areas,  which  complicates  the 
viability  of  traditional  transit  models.  To 
mitigate  regional  disparities,  reduce  transport 
poverty  and  ensure  access 
to  essential 
services  like  education  and  health,  the  social 
climate  plan  introduces  innovative  measures 
such  as  transport-on-demand  and  ‘mobility 
wallets’, 
reach 
specifically  designed 
underserved and rural populations (Annex 18). 

to 

Rail  transport  continues  to  present 
untapped potential for decarbonisation. In 
2023,  rail  journeys  accounted  for  1%  of  all 
passenger  travel,  the  second-lowest  share  in 
the EU. This contrasts sharply with the freight 
sector, where rail remains a strength, handling 
37.2%  of  transport,  compared  to  the  EU 
average  of  5.5%.  Despite  this,  the  network’s 
environmental  impact  is  limited  due  to  the 
very  low  electrification  rate  of  8.1%  (EU 
average:  57.6%).  The  electrification  of  the 
Kaišiadorys-Klaipėda  railway  line  –  supported 
by  Cohesion  Fund  investment,  supplemented 
by  RRF  funding  for  the  Radviškis-Klaipėda 
section – is expected to improve this. However, 
the  slow  roll-out  of  infrastructure  tolls  that 

reflect  the  external  costs  of  heavy-duty 
vehicles remains an unaddressed challenge for 
the  sector’s  overall  sustainability  (Annex  8). 
The  Rail  Baltica  project,  essential  for  shifting 
traffic  from  road  to  rail,  faces  soaring  costs, 
with  completion  now  delayed  until  at  least 
2030. 

Limited circularity and resource 
productivity as well as nature 
degradation weigh on industrial 
competitiveness 

by 

of 

focusing 

The  transition  to  a  circular  economy 
hinges  on  advancing  recycling,  improving 
resource productivity and  increasing  the 
circular  materials. Progress 
use 
towards the  2025  CSR  on ‘increasing resource 
productivity  to  progress  towards  a  circular 
economy, 
on 
limited. The 
resource efficiency’ has been 
successful reduction in landfilling (only 8% of 
municipal  waste  sent  to  landfill  in  2023, 
compared to the EU average of 22%) has been 
achieved largely  owing to  the  deployment  of 
municipal 
waste 
incineration. However, progress  on  reuse  and 
recycling 
stalled and 
has 
treatment remains concentrated  in the  lower 
levels  of 
the  waste  hierarchy. Resource 
productivity  in  Lithuania  is  two  times  lower 
than  the  EU  average  and the fourth-lowest  in 
the 
resource 
efficiency  and  production  costs. The  circular 
material use rate is three times lower than the 
EU  average  and  has  stagnated  at  the  same 
level for the past  10  years.  At  the  same  time, 
Lithuania  strongly  depends  on  raw  material 
imports. The 
strategy, 
adopted  in  2023,  outlines  priority  actions: 
boost  demand 
for  secondary  materials, 
advance  treatment  in  line  with  the  waste 
improve  governance  and 
hierarchy  and 
Implementation, 
traceability  of  materials. 
however, has been slow.  

EU, impacting industries’ 

economy 

circular 

Industry 
is  not  a  major  source  of 
emissions  in  Lithuania,  but  its  emission 
intensity  is  nearly  twice  the  EU  average. 
Both  a  national  strategy  outlining  policy  and 

17 

 
to 

to  climate 
network  especially  vulnerable 
change (Annex 10). Nature-based solutions are 
particularly  needed  –  to  enhance  adaptation 
and  mitigate  nature  degradation.  Lithuania  is 
improve  climate 
taking  some  steps 
adaptation  governance  by:  (i)  adopting  a 
national  climate  change  adaptation  plan  for 
2024-2030  (annexed  to  the  national  energy 
and  climate  plan);  (ii)  reforming  the  Fiscal 
Governance  Law  to  integrate  climate  risk 
assessment  into  the  budgetary  planning  of 
government-authorised 
and 
(iii) preparing  a  national  Climate  Change 
Adaptation  Law  to  strengthen  adaptation 
governance.  Under 
change 
adaptation  plan,  Lithuania  has  already 
to  adaptation 
allocated  EUR 612 million 
measures for infrastructure (27% of the total 
resilience 
allocation). 
and 
preparedness  will 
require  complementary 
incentives and support to unlock the necessary 
resources and investment decisions.   

institutions; 

Building 

climate 

the 

a 

and 

towards 

objectives 

decarbonisation 

funding 
investment 
mechanism for a clean industrial transition are 
missing;  so  far,  progress has  largely  relied  on 
‘the 
Efforts 
EU 
funding. 
of 
and 
transformation 
industrial  production’  focus  on  key  sectors, 
such  as  fertilisers,  oil  refining,  and  cement, 
through  electrification,  hydrogen  deployment, 
efficiency  improvements,  and  carbon  capture. 
The  CCS  Baltic  Consortium,  a  project  of 
common 
interest,  exemplifies  cross-border 
carbon  capture  infrastructure  supporting  this 
transition  could  be 
transition. 
coupled  with  a  shift  to  a  more  circular 
economy, especially in packaging, construction 
materials and bioeconomy value chains. 

Industrial 

to 

Nature  degradation  poses  significant 
risks 
Lithuania’s  economy  and 
competitiveness,  with  water  resources 
being  particularly  vulnerable.  Lithuania’s 
supply  chains  are  more  dependent  on 
ecosystem  services  than  the  EU  average. 
Overall,  41% of Lithuania’s economy is highly 
dependent on ecosystem services for its gross 
value  added.  In  sectors  such  as  agriculture, 
forestry,  fisheries,  mining,  construction  and 
healthcare,  100%  of  gross  value  added  is 
directly  dependent  on  ecosystem  services. 
Meanwhile,  annual  benefits  of  ecosystem 
restoration  and  maintenance 
in  Lithuania 
(EUR 1.1 billion)  largely  outweigh  the  annual 
costs (EUR 80.3 million). Degradation of water 
resources is of particular concern. Lakes, rivers 
and coastal waters are polluted, with barely a 
third achieving a good ecological status due to 
agricultural 
run-off,  urban  pollution  and 
nutrient flows, contributing to the Baltic Sea’s 
eutrophication.   

Lithuania  faces 
lower  climate-change 
risks  than  most  EU  countries,  but 
targeted  adaptation  and  investment  are 
needed to boost resilience. At 2%, Lithuania 
has  one  of  the  lowest  rates  of  insurance 
coverage  for  extreme  weather  events  –  the 
main climate-change risk it is exposed to. The 
EU  average  is  19%.  According  to  recent 
estimates, Lithuania will need to invest almost 
EUR 481 million  per  year  until  2050 
in 
adaptation  measures,  such  as  ecosystem 
restoration  and  investments  in  infrastructure 
and  the  food  sector,  with  the  transport 

18 

 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

2025 

(CSRs) 

country-specific 
Lithuania’s 
focused  on 
recommendations 
(i) improving primary care and healthcare 
(ii) addressing  shortages  of 
services, 
health 
(iii) providing 
professionals, 
adequate  financing  for  healthcare  and 
social  protection,  (iv) addressing  income 
inequality,  poverty  and  social  exclusion, 
(v) improving  the  design  of  the  tax 
system,  (vi) improving  access  to  and 
quality  of  social  housing,  (vii) increasing 
the  adequacy  of  old-age  pensions, 
(viii) improving  the  quality,  equity  and 
efficiency  of  education,  (ix) increasing 
teaching 
the  attractiveness  of 
labour 
(x) increasing 
profession, 
market  relevance  of  higher  education, 
(xi) promoting  the  acquisition  of  green 
skills,  (xii) improving  adult  learning,  and 
(xiii) increasing  the  coverage  of  active 
labour  market  policies  (ALMPs).  Lithuania 
has  taken  some  measures  to  improve  access 
to  healthcare,  including  the  roll-out  of  health 
centres,  to  increase  the  adequacy  of  social 
benefits  and  pensions,  to  improve  the  design 
of the tax system, to increase the enrolment in 
science, 
and 
the 
mathematics 
acquisition  of  green  skills,  and  to  improve 
adult learning for vulnerable groups. However, 
there  is  still  room  for  improvement  in  these 
and other policy areas.  

engineering 
to 

technology, 
(STEM), 

promote 

the 

the 

boost 

Addressing  these  challenges  could  help 
social 
Lithuania 
convergence.  The  second-stage  analysis  in 
line  with  the  Social  Convergence  Framework 
points  to  challenges  for  Lithuania  that  may 
affect  social  convergence  in  relation  to  its 

upward 

labour market, education and skills, as well as 
its social situation (9). 

Improving skills development 
throughout all stages of education 
and training to address skills 
shortages and stagnating 
productivity 

from 

schools 

Equity  challenges  and  significant  urban-
rural  disparities  persist  as  major 
weaknesses  in  the  education  system. 
While average performance in basic skills has 
remained  overall  stable,  Lithuania  faces  an 
urban-rural achievement gap that exceeds the 
EU  average,  partly  due  to  a  high  number  of 
teacher 
suffering 
small 
shortages.  Rural  areas  struggle  with  lower 
enrolment  in  early  childhood  education  and 
care (ECEC) and weaker educational outcomes. 
To  ‘improve  the  quality,  equity  and  efficiency 
of  the  general  education  system,  particularly 
addressing  the  urban-rural  achievement  gap’ 
(2025  CSR),  Lithuania  has  expanded  funding 
vulnerable  pre-primary  and  higher 
for 
education  students.  Efforts  to  rationalise  the 
school network, supported by the recovery and 
resilience  plan  (RRP),  have  started  to  deliver 
results: schools participating in the Millennium 
Schools Programme outperform those that do 
not  (see  Annex  13).  The  programme  has 
improved  inclusion,  student  well-being,  and 
recent 
environments.  However, 
learning 
regulatory changes allowing smaller classes to 
be  formed  in  gymnasiums  in  smaller  towns 
risk  stifling  progress.  The  rationalisation  of 
education  networks,  the  2023  skills-based 

(9)  European Commission, SWD(2026) 122. The analysis 
relies on all the available quantitative and qualitative 
evidence and the policy response undertaken and 
planned. 

19 

 
 
 
curriculum,  and  the  expansion  of  inclusive 
education  all  have  significant  potential  to 
improve  the  quality,  equity  and  efficiency  of 
education.  Yet, these  reforms  require  changes 
to  staff  training  and  practice,  consistent 
implementation 
further 
evaluation  of  education  quality  and  spending 
efficiency  and 
strengthening  data-based 
decision making.  

schools, 

across 

the 

Teachers  are  central  to  developing  the 
skills  of  the  future  workforce,  yet  the 
teaching  profession  faces  persistent 
shortages.  The  ageing  of 
teaching 
profession 
is  particularly  concerning,  even 
more  so  as  new  survey  results  reveal  that 
around half of young teachers intend to leave 
the profession within five years. Shortages are 
especially  acute  in  rural  areas,  as  well  as  in 
STEM  and  foreign  languages.  In  order  to 
‘increase  the  attractiveness  of  the  teaching 
profession and to address persistent shortages 
and  ageing  in  the  workforce’  (2025  CSR), 
Lithuania  has  taken  positive  measures  to 
further increase salaries, attract  new entrants 
and 
training. 
However, factors related to working conditions 
continue  to  impact  teachers’  well-being  and 
their  retention,  including  in  ECEC.  Compared 
with  the  EU  average,  salary  satisfaction 
remains  low  alongside  significantly  higher 
working  hours.  Specific  training  needs  remain 
unmet  (see  Annex  13).  The  attractiveness  of 
the  teaching  profession  would  benefit  from 
further  targeted  measures,  including  making 
initial  teacher  education  more  appealing  and 
improving  both  entry  routes  and  working 
conditions. 

induction 

improve 

teacher 

Lithuania has advanced the acquisition of 
green  skills.  To  ‘address  the  skills  mismatch 
via  promoting  the  acquisition  of  green  skills’ 
(2025  CSR),  Lithuania  has  made  substantial 
in 
progress  by  embedding  green  skills 
education 
competence-based 
curricula, 
the 
by 
implementation  of  the  RRP  measures  on  the 
update  of  vocational  education  and  training 
(VET)  programmes  and  the  adult  learning 
platform kursuok.lt (see Annex 13). 

continuing 

general 

and 

Low  VET  attractiveness  and  STEM 
education  gaps  drive  labour  shortages  in 

20 

fields 

sectors, 

(including 

hampering 

Lithuania’s 
key 
efforts  to 
increase  productivity.  VET 
remains  insufficiently  attractive,  contributing 
to labour shortages in certain sectors such as 
transportation  and  storage,  water  and  waste 
management,  as  well  as  some  occupations  in 
construction  (see  Annexes  11,  13  and  16). 
Although  the  overall  vacancy  rate  remains 
lower  than  the  EU  average,  certain  key 
transition  and  growth  sectors  already  face  or 
are forecast to face labour shortages, notably 
STEM 
information  and 
communications  technology).  This  is  further 
exacerbated  by 
low  enrolment  and  high 
dropout  rates  in  STEM  tertiary  education, 
relatively  low  labour  market  absorption  of 
graduates,  and  low  participation  of  women 
(see  Section  2  and  Annex  13).  The  recent 
tightening  of  immigration  rules  and  reduction 
of  quotas,  while  aiming  to  address  national 
security concerns, could further exacerbate the 
shortage  of  labour.  At  the  same  time,  the 
country lacks a holistic view on the long-term 
integration  of  foreign  labour  force.  All  these 
factors 
labour 
productivity  in  the  country,  which  lags  behind 
the  rapid  increase  in  wages  in  recent  years, 
despite  a  rebound  in  2025  (see  Annex 11). 
Further  efforts  are  thus  needed  to  increase 
labour productivity, including by improving the 
education  system’s  alignment  with 
labour 
market  needs  and  strengthening  career 
guidance 
(for  example  by 
integrating  VET  job  shadowing  and  employer 
visits),  accelerating  digitalisation  and  making 
reskilling 
better  use  of  upskilling  and 
mechanisms,  as  well  as  through  holistic 
support  for  long-term  integration  of  foreign 
workers. 

hindering 

schools 

further 

risk 

in 

Efforts  are  being  made  to  improve  the 
labour  market 
relevance  of  higher 
education, but outcomes will take time to 
materialise.  To  ‘increase  the  labour  market 
relevance  of  higher  education’  (2025  CSR), 
Lithuania has implemented reforms supported 
by  the  RRP  that  aim  to  reshape  the  higher 
education landscape. It has benefited from the 
Technical  Support  Instrument  to  improve  the 
quality  and  the  labour  market  relevance  of 
education  and  training.  However,  improved 
outcomes  are  only  expected  as  from  2028 
(see Annex 13). 

 
in  adult 
Increasing  the  participation 
learning and improving the labour market 
relevance  of  adult  learning  offers  is 
essential  to  support  upskilling,  reskilling 
and  growth  in  Lithuania.  To  ‘address  the 
skills  mismatch  via  improving  adult  learning 
including  for  unemployed  people,  low-skilled 
people  and  other  vulnerable  groups’  (2025 
CSR), Lithuania has prioritised these groups for 
access  to  state-funded  credit  for  learning 
offers  on  the  individual  learning  accounts 
(ILAs) platform www.kursuok.lt (see Annex 13). 
However,  it  remains  to  be  seen  if  these 
changes  will  increase  participation  rates  for 
these  population  groups.  At  the  same  time, 
increase  overall 
there 
participation in adult learning and improve the 
labour  market  relevance  of  the  courses 
offered 
(see 
the 
Annex 13).  

is  still  scope 

through 

system 

ILA 

to 

Annex  11).  While  the  country  has  expanded 
the  network  of  regional  career  centres  and  is 
rolling out a debt counselling system for those 
outside  the  labour  market,  it  is  too  early  to 
assess the impact of these measures on ALMP 
coverage.  The  ongoing  RRP  measure  on  the 
acquisition  of  high  value-added  qualifications 
and  competences  has  proven  highly  effective 
in  terms  of  labour  market  integration,  and 
Lithuania  could  benefit  from  continuing  the 
measure  also  after  2026.  At  the  same  time, 
demand  for  ALMPs  consistently  exceeds  the 
allocated  budget,  which  is  also  unsustainably 
dependent on EU funds. Due to rising costs of 
ALMPs, ALMP participation and coverage went 
down significantly in 2025 and is expected to 
diminish  even  more  in  2026  (see  Annex  11). 
Therefore,  the  need  to  ensure  adequate  and 
sustainable  financing  and  coverage  of  ALMP 
measures remains pressing. 

to 

the 

The 

the 

surge 

(mainly 

groups. 

challenges 

Nevertheless, 

Adverse demographic trends and a recent 
slowdown  in  labour  migration  pose  long-
country’s 
term 
competitiveness,  underscoring  the  need 
improve  the  activation  of  under-
to 
represented 
in 
from  Belarus  and 
immigration 
Ukraine)  substantially  increased  the  working-
age  population  (15-64)  between  2021  and 
2024. 
working-age 
population  is  forecast  to  start  shrinking  this 
year, at one of the fastest rates in the EU (see 
Annex  11).  This  risks  exacerbating  labour  and 
skills shortages, with further negative spillover 
effects  on  growth  and  pension  system 
sustainability.  The  situation  also  calls  for 
efforts 
the  activation  and 
integration  of  under-represented  groups, 
including  young  people  and  persons  with 
disabilities,  whose  labour  market  situation  is 
worrying. The rate of young people (15-29) not 
in  employment,  education  or  training  remains 
above  the  EU  average  (12.4%  vs  10.9%  in 
2025).  Among  them,  the  share  of  inactive 
people  and  of  people  aged  15-19  and  20-24 
is  particularly  high,  signalling  the  potential 
benefits of expanding outreach and prevention 
efforts,  including  via  the  framework  of  the 
reinforced  Youth  Guarantee  (see  Annex  11). 
Persons  with  disabilities  are  also  experiencing 
structural  barriers  to  entering  the 
labour 
market,  reflected  by  very  low  employment 

improve 

to 

Addressing the insufficient 
capacity for labour market 
activation and the shrinking labour 
force  

regional 

differences 

remains  high,  with 

The  unemployment  rate  has  decreased 
significant 
but 
regional  disparities,  exacerbated  by  the 
underperforming  and  underfunded  labour 
market  activation  system.  While 
the 
employment  and  activity  rates  are  constantly 
increasing,  the  unemployment  rate  remains 
above the  EU  average  (6.9%  vs  6% in  2025). 
Significant 
in 
unemployment  underscore  that  opportunities 
for labour market integration are uneven, with 
some  counties  and  municipalities  bordering 
Russia 
particularly 
vulnerable  (see  Annexes  11  and  19).  In  order 
to  ‘increase  the  coverage  of  active  labour 
market  policies,  including  through  improved 
incentives to participate’ (2025 CSR), Lithuania 
has  reformed  the  unemployment  benefit 
system  to  address  the  high  unemployment 
trap and strengthen incentives to participate in 
the labour market, but it is too early to assess 
the  effect  of  this  reform.  The  EUROMOD 
simulation  shows  varying 
results  across 
different  households  and  earning  levels  (see 

and  Belarus 

being 

21 

 
levels. This suggests that the 2023 and 2024 
reforms  on  their  integration  into  the  open 
labour  market  and  the  one-stop-shop  model 
for  disability  assessment  offer  scope  for 
further improvement (see Annexes 11 and 12).  

The  low  rate  of  collective  bargaining 
hinders further progress on wage growth 
and  job  quality.  Lithuania  has  experienced 
one of the fastest rates of wage growth in the 
EU  in  recent  years,  which  together  with  the 
relatively  low  prevalence  of  part-time  and 
(including  among 
temporary  employment 
women)  contributes  towards  improving  job 
quality in Lithuania. At the same time, the in-
work  poverty  rate  increased  in  2024  and 
2025, especially among young people (18-24), 
signalling 
for 
improvement in terms of wage levels. The very 
low  collective  bargaining  rate  in  Lithuania 
hinders  workers’  bargaining  power  and  is  one 
of the remaining barriers to a faster growth of 
wages and overall job  quality (see Annex 11). 
In  addition  to  traditional  capacity-building 
measures, 
planning 
amendments  to  its  laws  to  address  this,  but 
the  shape  and 
impact  of  such  planned 
adjustments remain to be seen. 

Lithuania 

is  still 

there 

room 

also 

that 

is 

Improving services and addressing 
workforce shortages in healthcare 
and long-term care, including 
through adequate and sustainable 
funding 

system 

is 
healthcare 
Lithuania’s 
characterised  by  suboptimal  funding.  To 
‘provide  adequate  financing  for  healthcare’ 
(2025 CSR),  Lithuania  has  increased  spending 
per inhabitant, but it still remains below the EU 
average.  Outpatient  care  receives  the  largest 
allocation,  accounting  for  nearly  one  third  of 
health  expenditure.  Lithuania  has  consistently 
underinvested  in  the  health  sector,  recording 
some  of 
levels  of  health 
infrastructure investment per capita in the EU. 
Furthermore,  transfers  from  the  National 
Health  Insurance  Fund  are  not  sufficient  to 
cover  the  full  demand  for  and  costs  of 
healthcare  services.  This  limited  funding  of 

lowest 

the 

healthcare  infrastructure  and  services  has 
contributed to poor health outcomes, including 
low  life  expectancy  and  a  high  treatable  and 
preventable  mortality 
reform  of 
the healthcare  funding  mechanism  could  be 
considered to increase funding adequacy. 

rate.  A 

Progress  has  been  made  to  strengthen 
Lithuania’s  long-term  care  (LTC)  system 
and  improve  care  outcomes,  but  more  is 
needed. Lithuania is developing an integrated 
LTC model, aiming to provide a one-stop-shop 
basis  for  organising,  delivering  and  financing 
LTC services. However, it is not expected to be 
completed  until  after  2027,  subject 
to 
adequate  and  sustainable  financing.  The 
current spending on LTC, which stands at only 
1% of GDP (EUR 343 million in 2020), is below 
the  EU  average  of  2.2%.  By  strengthening 
to  affordable  high-quality  LTC, 
access 
including  in  remote  areas,  and  developing  a 
comprehensive  and  integrated  LTC  system, 
Lithuania  could  reduce  unmet  needs  for  LTC 
and improve care outcomes.  

spending. 

out-of-pocket 

long  waiting 

limited  access 

Lithuania’s  healthcare  system  continues 
to  face  significant  challenges.  These 
to  primary  care, 
include 
in  remote  areas,  high  unmet 
particularly 
times  and 
medical  needs, 
substantial 
In 
response to the 2025 CSR to ‘make the health 
system  more  resilient  [...]  by  strengthening 
access  to  primary  and  preventive  care  and 
increasing  the  availability  of  health  workers’, 
Lithuania has made some progress by setting 
up  health  centres  across  municipalities. 
However,  health  outcomes  remain  among  the 
worst  in  the  EU.    Life  expectancy  in  Lithuania 
is  77.5  years  in  2024,  4  years  below  the  EU 
average.  Many  deaths  in  Lithuania  are  from 
illnesses  that  could  have  been  treated  or 
prevented,  with  163.3  deaths  per  100,000 
people  from  treatable  conditions  and  264.8 
deaths  per  100,000  people  from  preventable 
conditions  in  2023,  significantly  higher  than 
the  EU  averages  of  86.8  and  150.9 
respectively. Households in Lithuania face one 
of  the  highest  out-of-pocket  healthcare  costs 
in  the  EU,  with  31.4%  of  all  healthcare 
spending  coming  from  individuals  in  2024, 
compared to around 15% in the rest of the EU 
in  2023,  underscoring  the  need  for  targeted 

22 

 
action  to  strengthen  primary  and  community-
based care. 

shortage  of  health  and  LTC 
The 
is  a  pressing  concern. 
professionals 
Lithuania  has  only  3.4  practising  doctors  per 
1 000  inhabitants  (EU  average:  3.9).  At  the 
same  time,  both  the  population  and  the 
workforce  are  ageing,  increasing  demand  and 
raising  significant  concerns  over  workforce 
renewal,  particularly  among  nurses.  In  2022, 
over half of Lithuania’s nurses were aged over 
55, while fewer than 20% were under 44. 34% 
of  doctors  are  aged  55  or  over.  Staff 
shortages  are  also  high  in  LTC:  Lithuania  has 
only  1.2  LTC  workers  in  employment  per  100 
people  aged  65  and  over,  well  below  the  EU 
average  of  3.3.  The  uneven  geographical 
distribution  of  medical  professionals  and 
underdeveloped 
(see 
public 
Annex 12)  further  limit  access  to  care,  with 
remote  areas  being  particularly  affected. 
Working  in  these  areas  is  often  unattractive 
due  to  lower  salaries  and  more  challenging 
working  conditions.  While  Lithuania  intends  to 
attract  and 
retain  health  professionals, 
including  over  1 600  specialists  across  53 
municipalities  by  2029,  the  shortage  remains 
a challenge. 

transport 

Addressing income inequality, 
poverty and social exclusion, 
including through adequate and 
sustainable funding 

Further  efforts  are  needed  to  address 
persistently  high  income  inequality  and 
poverty,  and  wide  regional  disparities.  In 
order  to  ‘address  income  inequality,  poverty 
and  social  exclusion,  including  via  increasing 
the  coverage,  adequacy  and  effectiveness  of 
the  social  protection  system,  improving  the 
design of the tax system and improving access 
to  and  quality  of  social  housing’  (2025  CSR), 
Lithuania has adopted an RRP-based minimum 
income 
indexation, 
increasing  child  maintenance  and  other 
benefits, as well as an income tax reform (see 
Annex  12)  and  an  unemployment  insurance 
reform  (see  Annex  11).  While  the  income  tax 

benefit 

reform 

on 

Russia 

Belarus. 

introduced  more  progressivity 

in 
reform 
taxation,  the  impact  of  these  reforms  on 
poverty  and  income  inequality  is  expected  to 
be  rather  incremental.  In  the  meantime,  the 
already  high  levels  of  poverty  and  income 
inequality  have 
increased,  especially  with 
regard to vulnerable groups (e.g. persons with 
disabilities,  who  face  the  highest  risk  of 
poverty and social  exclusion in the EU)  and in 
the  more  remote  regions,  including  the  ones 
bordering 
These 
and 
challenges  are  exacerbated  by  persistently 
uneven  access  to  social  services  across 
municipalities,  unsustainable  reliance  on  EU 
funds  for  their  financing,  and  the  lack  of 
comprehensive  data  and  effective  centralised 
monitoring (see Annex 12). The social services 
which  are  funded  from  municipal  budgets 
remain  uneven  across  municipalities,  do  not 
fully  match  actual  demand,  and  are  often 
long  waiting  times  and 
characterised  by 
insufficient municipal  funding  (see  Annex  12). 
The  weaknesses  in  the  local  assessment  and 
provision  of  social  services  are  compounded 
by the lack of comprehensive local-level data, 
a  centralised  database  and  an  effective 
centralised  monitoring  system.  This 
limits 
oversight, planning and management of social 
service provision across the country. Lithuania 
has  earmarked  considerable  EU  funds  to 
improve  access  to  and  quality  of  social 
housing, but these efforts will only address the 
issue to some extent, while waiting times and 
the  number  of  people  waiting  for  social 
housing remain very high (see Annex 16). 

‘address 

increasing 

In  order  to 

Older  people  (65+)  continue  to  face  high 
poverty and social exclusion, which could 
be  exacerbated  by  the  rapidly  ageing 
income 
population. 
inequality,  poverty  and  social  exclusion  also 
via 
the  adequacy  of  old-age 
pensions,  while  maintaining  the  sustainability 
of  the  pension  system’  (2025  CSR),  Lithuania 
has  continued  to  increase  old-age  pensions, 
including through the 2022 pension indexation 
reform  under  its  RRP.  However,  the  adequacy 
of  pensions  remains  relatively  low,  whereas 
the  reform  of  the  second-pillar  pension 
scheme, notably the move to an opt-in model 
is 
and  expanded  withdrawal  possibilities, 
expected  to  materially  reduce  participation 
and  may  weaken  future  pension  adequacy. 

23 

 
The  projected  rapid  ageing  and  the  related 
shrinking  of  the  working-age  population  risk 
increasing 
ratio, 
underscoring  the  need  to  find  sustainable 
(see 
to  ensure  pension  adequacy 
ways 
Annex 12).   

the  old-age  dependency 

in  Lithuania 

Government spending on social protection 
remains  low,  hindering  the  impact  of 
social transfers on poverty reduction. The 
social  protection  system 
is 
characterised  by  low  adequacy  of  pensions 
and  social  benefits,  and  persisting  gaps  in 
social protection coverage. In order to ‘provide 
adequate financing to social protection’ (2025 
CSR),  Lithuania  has  adopted  a  minimum 
income  reform  that  improves  the  indexation 
mechanism  of  social  benefits.  The  reform 
commits  Lithuania  to  increase  spending  on 
social benefits, which is significantly below the 
EU  average,  resulting  in  low  adequacy  of 
social  transfers, 
impact  on 
poverty reduction. However, the effects of this 
reform  are  yet  to  be  seen,  while  increasing 
poverty  and  income  inequality  rates  call  for 
further  efforts.  In  order  to  ensure  that  the 
needs  of  the  most  vulnerable  groups  are 
adequately  supported,  it  is  necessary  for 
Lithuania  to  ensure  appropriate  resources  for 
social protection, as well as for developing and 
providing 
for 
addressing  material  deprivation.  Furthermore, 
there  is  scope  to  expand  community-based 
services  for  persons  with disabilities  to  better 
support the right to independent living. 

limiting  their 

including 

services, 

social 

24 

 
 
KEY FINDINGS 

In  areas  covered  by  existing  country-
specific  recommendations,  Lithuania  would 
benefit from: 

• 

less  detrimental 

raising  tax  revenues  by  increasing 
to  growth, 
taxes 
improving  tax  compliance,  simplifying 
and  rationalising  special  tax  regimes, 
and continuing efforts to phase out non-
targeted fossil-fuel subsidies; 

•  strengthening 

intermunicipal 
cooperation  by  providing  institutional 
support  and  incentives  for  the  provision 
of  shared  public  services  and  for 
attracting investments to regions; 

• 

•  enhancing  access  to  finance  by 
addressing structural barriers to lending, 
increasing  the  number  of  initial  public 
offerings of state-owned enterprises and 
strengthening  supplementary  pension 
schemes  to  increase  investment-based 
savings; 

• 

improving  business-science  linkages 
by addressing the fragmented university 
network  and  streamlining  existing  tax 
private 
incentives 
investment 
support 
innovative capacity;  

facilitate 
to 
in  R&D  and 

•  supporting 

energy 

system 
integration  by  accelerating  offshore 
wind deployment and investments in the 
distribution  grid,  strengthening  system 
flexibility  and 
restoring  cross-border 
connections; 

• 

improving  housing  quality  and 
energy  efficiency  by  accelerating 
renovations,  thereby  reducing  energy 
demand and housing costs; 

•  advancing  industrial  transformation 
strengthen 

circularity 

and 

to 

competitiveness 

economic 
by 
promoting  decarbonisation  of  industrial 
production, 
resource 
efficiency,  increasing  the  use  of  circular 
materials  and  developing  recycling  and 
recovery capacities; 

improving 

•  decarbonising 

transport 

by 
accelerating  the  electrification  of  the 
public  and  private  car  fleet  and  rail 
infrastructure,  completing  Rail  Baltica, 
and 
improving  the  coordination  and 
attractiveness of public transport; 

by 

increasing 

fostering upward social convergence 
by  addressing  skill  shortages,  in 
the 
particular 
attractiveness  of  vocational  education 
and  training,  improving  participation  in 
and  labour  market  relevance  of  adult 
increasing  the  coverage  of 
learning, 
active 
labour  market  policies,  and 
enhancing  the  integration  of  persons 
with  disabilities,  foreigners  and  other 
under-represented groups; 

•  promoting 

human 

improving 

capital 
development  by 
the 
training  system, 
education  and 
including  by  addressing  the  urban-rural 
incentivising 
gap, 
achievement 
technology, 
science, 
enrolment 
engineering 
mathematics, 
and 
particularly  for  women,  increasing  the 
attractiveness 
teaching 
of 
profession, and retaining new entrants; 

the 

in 

the 

quality 

improving 
and 
accessibility  of  public  services  by 
and 
providing 
improving funding models; 

adequate 

financing 

improving  health  outcomes 
by 
strengthening primary community-based 
care, addressing shortages of health and 
professionals, 
long-term 

care 

• 

• 

25 

 
 
in 

remote  areas,  and 
particularly 
developing an integrated long-term care 
system; 

•  addressing 

inequality, 
income 
poverty  and  social  exclusion  by 
increasing  the  coverage,  adequacy  and 
effectiveness  of  the  social  protection 
to  social 
improving  access 
system, 
housing  and  its  quality,  and  increasing 
the adequacy of old-age pensions, while 
maintaining  the  sustainability  of  the 
pension system. 

26 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

LIST OF TABLES 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A3.1. 
A4.1. 

CSR implementation and Commission assessment 
Projected change in age-related expenditure in 2025-2040 and 2025-2070 
Supplementary pension schemes - Scope for expansion 
Fiscal Governance Database indicators and Public Accounting Maturity 
Taxation Indicators 
Key innovation indicators 

29 

35 

42 

42 

46 

50 

50 

56 

64 

72 

77 

77 

84 

90 

97 

97 

101 

105 

109 

110 

114 

119 

119 

121 

127 

35 
43 
45 
45 
46 
55 

 
 
 
63 
64 
71 
73 
73 
82 
96 
109 
112 
122 
123 

43 
46 
48 
52 
61 
65 
66 
67 
72 
73 
79 
84 
85 
87 
97 
101 
110 
111 
114 
115 
115 
118 
119 
121 
121 

121 
124 
128 

Single Market and Industry 
Savings and Investments Union summary diagnostic 
Financial sector indicators 
Lithuania. Selected indicators on better regulation practices for primary legislation 
Digital Decade key performance indicators: availability of digital public services 
Key clean industry and climate mitigation indicators: Lithuania 

A5.1. 
A6.1. 
A6.2. 
A7.1. 
A7.2. 
A8.1. 
A10.1.  Key Adaptation Indicators 
A14.1.  Social Scoreboard for Lithuania 
A15.1.  Key health indicators 
A18.1.  Main developments, challenges and the allocation of resources 
A18.2.  Key regional indicators (at NUTS 3 level) for Lithuania 

LIST OF GRAPHS 

Composition of non-financial corporates' funding 
Capital markets and financial intermediaries 
Composition of households' financial assets 
Trust in the justice system, regional / local authorities and in government 

Primary spending evolution and compositional change 
Tax revenue by economic function in 2024, LT (outer ring) and EU-27 (inner ring) 
Tax wedge for single and second earners as a % of total labour costs, 2025 
R&D investment as a percentage of GDP, 2010-2024 

Greenhouse gas emissions in the effort sharing sectors, 2005, 2023, 2024 
Electricity and gas prices for household and non-household consumers, first half of 2025 
Low-carbon electricity generation vs. electricity wholesale prices, 2025 
Lithuania’s installed renewable capacity vs electricity generation mix 

A2.1. 
A3.1. 
A3.2. 
A4.1. 
A5.1.  Manufacturing industry production: total and selected sector, index (2021=100), 2015-2024 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2.  Most time-consuming aspects of service delivery 
A8.1. 
A9.1. 
A9.2. 
A9.3. 
A11.1.  Key labour market indicators 
A12.1.  Poverty and social exclusion 
A15.1.  Treatable mortality 
A15.2.  Potential gains in working-life years from prevention, between 2022 and 2040 
A16.1.  House prices, rents and price-to-income evolution in LT and EU27 since 2005 
A16.2.  House supply indicators in LT since 2005 
A16.3.  Borrowing costs and housing loans, in LT and EA since 2018 
A16.4.  Housing affordability selected indicators 
A17.1.  Progress towards the SDGs in Lithuania 
A18.1.  GDP per head (PPS, EU=100) growth, NUTS 3, 2004-2024 
A18.2.  Productivity per hour worked: average annual growth and level, NUTS 3 

LIST OF MAPS 

A18.1.  GDP per head compared with the EU average, NUTS 2 
A18.2.  Population growth, 2015-2024, NUTS 3, annual average change per 1000 residents 
A19.1.  TEN-T Cross-Border & National Priority Sections in Lithuania. 

30 

 
 
 
 
 
 
ANNEX 1: CSR IMPLEMENTATION  

Table A1.1: CSR implementation and Commission assessment 

(Continued on the next page) 

31 

 Lithuania faces challenges in a wide range of policy areas, as identified in the country-specific recommendations (CSRs). Lithuania was recommended, among other things, to reinforce defence spending while ensuring fiscal sustainability, enhance SME financing and regional innovation, accelerate the green transition and energy independence, strengthen healthcare resilience and social equity, and improve education and labour market alignment. The Commission has assessed the degree of implementation of the 2025 CSRs considering the policy action taken by Lithuania to date*. To do so, the Commission has taken into account the information provided by Lithuania in its Annual Progress Report as well as other information sources. This annex provides summary information on the policy actions taken or planned by Lithuania for each CSR. More detailed information on these actions is included in the relevant chapters and other annexes of the report. *CSR 2 is not assessed in CeSaR. RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  1.1 Reinforce overall defence and security spending and readiness while ensuring debt sustainability in line with the European Council conclusions of 6 March 2025. Total general government defence expenditure in 2026 is projected at 2.9% of GDP, corresponding to an increase of 0.5 ppt. compared to 2024. Total general government defence expenditure in 2027 is projected at 3.5% of GDP, corresponding to an increase of 1.0 ppt. compared to 2024. Substantial Progress 1.2 Adhere to the maximum growth rates of net expenditure recommended by the Council on 21 January 2025, while making use of the allowance under the national escape clause for higher defence expenditure. Cumulated deviation in 2025 amounted to 1.5% of GDP and is only partially explained by the NEC flexibility (1.2 pps. of GDP). Cumulated deviation in 2026 projected at 2.2% of GDP and is only partially explained by the NEC flexibility (1.5 pps. of GDP).   Limited Progress 1.3 Provide adequate financing for healthcare   Lithuania has increased the health insurance contribution paid by the state for persons insured at its expense from EUR 773.9 to EUR 781 per person.   Limited Progress 1.4 [Provide adequate financing for] social protection Lithuania has taken initial steps to increase funding for social protection by adopting a reform of social benefit indexation.  Some progress 1.5 [Provide adequate financing for] general public services Lithuania concluded a binding collective agreement on wage-setting for general government employees.  Limited progress 1.6 Improve tax compliance    Lithuania has strengthened tax collection by adopting measures laid down in its RRP: upgrading IT systems, including real-time VAT reporting, introducing automated transaction data reporting and e-receipts, new cash registers, limiting cash payments and providing training for civil IMF technical assistance to help reduce the size of the shadow economy and the value-added tax (VAT) gap, as well as improve tax administration and collection. Some Progress     
 
 
 
      
 
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(Continued on the next page) 

32 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  servants. 1.7 Broaden the tax base to sources less detrimental to growth In 2025, Lithuania adopted a tax package, that included raising revenues through measures that are less detrimental to growth, including a levy on non-life insurance premiums, an excise on sugar-sweetened drinks, a reduction of VAT tax exemptions, changes in taxation of immovable property, and further increases in excise duty rates on ethyl alcohol and alcoholic beverages, tobacco products, and their alternatives.  Some Progress 3.1 Improve access to finance for small and medium-sized enterprises including by stimulating competition in financial services and participation in financial markets by facilitating the use of savings for investment Introduction of the Investment Account regime and the Capital Market Development Guidelines Launch of the 50 million Baltic Capital Market Acceleration Fund; Strategic Private Credit Co-Investment: Lithuania has launched a €191.6 million initiative in partnership with the European Investment Fund (EIF).  Amended Law on Supplementary Voluntary Pension Accumulation introduces significant changes to the investment framework by expanding eligible asset classes and establishing a new regime for derivatives.  Law on the Accumulation of Pensions abolishes automatic enrolment, introduces broader exit possibilities including full withdrawal in exceptional health cases and during a 2026–2027 transitional window, allows partial or early withdrawals under specified conditions.  Amendment to Government Resolution No. 910, strengthens ILTE’s mandate, and creates the conditions for more streamlined administration of state- and EU-funded financial instruments The government is injecting €412 million into the national development bank (ILTE) to reach a total capital of €800 million by 2026 and enabling it to raise additional capital on the market. A comprehensive market gap assessment is planned to better calibrate and target interventions As of early 2026, Lithuania is enshrining the ESAP into national law. This creates a centralized digital platform for SME financial data, directly addressing the "information asymmetry" and "poor documentation" issues that remain a primary cause of SME loan rejections.  Limited Progress 3.2 Facilitate investment in R&D and support innovative capacity,  New support initiatives launched: nationally funded measures in AI aimed at SMEs and different measures in the Cohesion programme (STEP, procurement, Plan to establish national AI factory Some Progress  
 
 
      
 
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33 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  AI) Lithuania is on track to meet its national target for public R&D investment. 3.3 including by reviewing and streamlining existing tax incentives for R&D,  N/A Proposal for reform to simplify R&D tax incentives initiated by MoE (ex-ante certification of initiatives which qualify for R&D exemptions), but it did not yet pass the government vote.  Limited Progress 3.4 reinforcing institutional and structural capacity of higher education institutions and research institutes in particular through improving the university network to foster business-science linkages  N/A Preparing for 2028 exercise to evaluate performance of whole public science base.  Limited Progress 3.5 and incentivising enrolment in post-secondary education in science, technology, engineering and mathematics (STEM) fields. Lithuania continued several initiatives in 2025 dedicated to address the shortage of talent in STEM, notably the STEM scholarships initiative.  N/A Some Progress 3.6 Address regional disparities by improving the legal and institutional framework to promote intermunicipal cooperation and development of local clusters in order to attract investments to regions Late-December amendments to the Public Administration Law improving the legal and governance framework for inter-municipal cooperation for joint provision of services    Some Progress 3.7 and to improve provision of public services, including the coordination of public transport routes and modes.  Health reforms introduced a needs-based, state-funded municipal service model.    Travel planning and ticketing system is foreseen to be implemented as part of the Social Climate Plan, which should provide a more coordinated public transport solution and facilitate access.  Limited Progress 4.1: Further reduce reliance on fossil fuels and imported energy Acceleration of domestic renewable electricity deployment: Overall installed renewable capacity at 6,200 MW (+36% vs 2024). Solar PV capacity reached 3.3 GW (+27% vs 2024). Onshore wind capacity reached 2.5 GW (+37% vs 2024). Expansion of decentralised renewable generation: growth in prosumers Offshore wind deployment for renewable electricity self-sufficiency by 2030, following state aid approval (2023) for 700 MW with a 15-year CfD , although the 2nd tender (Jun - Oct 2025) was invalid.   Some Progress  
 
 
      
 
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34 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  to 170 000 in 2025 (+37% vs 2024). Expansion of energy communities (23 new ones in 2025; total 62). 4.2 and ensure sufficient capacity in and access to the electricity grid with a view to maintaining a fast pace of deployment of renewable energy.  Reinforcement & modernisation of transmission infrastructure linked to synchronisation (although interconnectivity was temporarily reduced to 21% due to synchronisation). Advancement of network planning to address growing connection demand from decentralised renewable generation and storage. Expansion of system flexibility and storage capacity through development of the Kruonis pumped storage expansion. Completion of the Kruonis pumped storage expansion (fifth unit, +110 MW), expected by end-2026. Development and/or planning of additional cross-border electricity interconnection capacity (Harmony Link with PL, reinforcement with LV, possible offshore interconnector with DE); and public consultations on additional system operation measures to increase the commercial electricity trade capacity of the LitPol Link interconnection. Some Progress 4.3 Make buildings more energy efficient to reduce energy poverty,   Reinforcement of the building renovation framework in the context of the RRP (improved national coordination, enhanced digitalisation and better management of information). Increased funding for building renovations (with RRF and other sources of EU funding). Renovations of more than 500 buildings underway. Draft National Renovation Plan prepared. Further implementation of building renovations under the reinforced framework. Measures for energy efficiency renovations are being included in the draft Social Climate Plan and National Building Renovation Plan.    Limited Progress 4.4 and continue to take action to phase out non-targeted fossil-fuel subsidies, notably ones for heating.   Abolished the reduced VAT rate for residential heating hot water and firewood starting in January 2026. The excise tax on certain fossil fuels has been increased, but further increase has been put on hold due to concerns about cross-border fuel purchases.  N/A Limited Progress 4.5 Increase resource productivity to progress towards a circular economy, by focusing on resource efficiency    Landfilling successfully reduced surpassing the EU 2035 target mainly by investing in incineration capacity with energy recovery. Circular economy strategy 2035 adopted in the context of the RRP advancement in metrics on green public procurement. Implementation of the Circular economy strategy 2035, but with no specific actions.  Limited Progress 4.6 and the transformation and decarbonisation of industrial production.   Modernisation Fund used to support industry decarbonisation through energy efficiency improvements, substitution of National carbon capture and storage legislation planned for 2026, including provisions on regulatory governance, Limited Progress  
 
 
      
 
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35 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress   polluting technologies and renewable energy deployment. Additional support from Cohesion Fund and the Just Transition Fund is provided to industrial installations to aid decarbonisation. infrastructure ownership, third-party access and tariff design.   4.7 Increase the uptake of public and sustainable transport.  Increase of excise duties, and Introduction of CO2 component in excise duties, gradually increasing until 2030.  RRF and Modernisation Fund: Subsidies for individuals and legal entities for purchasing zero-pollution heavy vehicles and electric buses; introduction of VAT deduction on BEV purchases up to €50,000 Revision of the Law on Alternative Fuels implementing low-emission zones in cities with over 80,000 inhabitants and establishing LEZs in highly polluted areas.  Increasing publicly accessible charging points to 4,800 points (15-fold since 2020); Electrification of the Kaišiadorys–Klaipėda train line is almost complete. The goal is 6,000 points by 2030, with 43 charging pools along TEN-T corridors. Approximately 100 km of cycling infrastructure is implemented annually. Nine electric (EMU) and six battery-electric (BEMU) trains will enter service in late 2026. Rail Baltica: Construction is ongoing on the North-South axis, although it is heavily delayed due to high costs. Social Climate Plan: €440 million is planned for transport-sector measures (2026–2032)  Limited Progress 5.1 Make the health system more resilient and improve health outcomes by strengthening access to primary and preventive care and increasing the availability of health workers. In 2025, Lithuania made some progress in improving healthcare services, including the continuous implementation of Health Centres in municipalities and introduction of new services in Mental Health Centres.  Ongoing implementation of the hospital network reorganisation reform. Consideration of a single-payer model for healthcare financing to reduce OOP payments  Preparation of procedures for mobilisation actions of the National Crisis Management Centre and the Emergency Management Plan. Some Progress 5.2 Address income inequality, poverty and social exclusion by increasing the coverage, adequacy and effectiveness of the social protection system,  Lithuania has reformed benefit indexation to reflect inflation and wage growth, increased child maintenance benefits and extended unemployment insurance for persons nearing retirement. Further amendments seek to broaden access to social assistance and reinforce labour market incentives. Several initiatives, including labour-market and pay-transparency reforms, remain under preparation or pending implementation. Most measures will enter into force from 2026 onwards Some Progress 5.3 improving the design of the tax system, In June 2025, Lithuania amended the Law on Personal Income Tax, increasing the progressivity of Lithuania plans to carry out a comprehensive review of the business regimes legal Substantial Progress  
 
 
      
 
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36 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress   personal income taxation, and also introducing unified progressive rates for many sources of income]  framework. Based on the results of the review, legal amendments should be adopted, which will also affect special tax regimes. 5.4 improving access to and quality of social housing,  The Government earmarked EUR 126 million of European funds to build social housing for 3850 users (90M€ have been committed for 45 projects representing ca 2200 users. The projects are still ongoing). Adopted legislative amendments setting standards for social housing to ensure dignified living conditions.   Earmarking of EUR 35 million for social housing through the social climate fund. Continuation of the construction of the units of social housing.  Law on "Support for Housing Acquisition and Rental" which will inter alia define decency criteria for social housing.  Some Progress  5.5 and increasing the adequacy of old-age pensions, while maintaining the sustainability of the pension system. The 2026 budget foresees a 12% increase in the average old-age pension.   The second-pillar pension scheme is being reformed, notably moving to an opt-in model and expanded withdrawal possibilities A review of the State Social Insurance Reserve Fund (to be carried out in 2026-2027) is planned. Limited Progress 6.1 Improve the quality, equity and efficiency of the general education system, particularly addressing the urban-rural achievement gap,   Establishment of The Subject Council to review and update the competence-based curriculum. Funding increases for non-formal education by EUR 5M (to a total of EUR 25M). Vilnius Municipal Council approved a rule that newly arrived children from non-EU countries must receive primary education in Vilnius municipal schools only in Lithuanian-language schools. Permitted small class sizes in schools with municipalities paying half the costs; no quality impact assessment was conducted.    Finalisation of the Millennium Schools Programme   Limited Progress 6.2 while increasing the attractiveness of the teaching profession to address persistent shortages and ageing in the workforce.  Increase in teachers’ salaries by 8.41%. Established working group to focus on training and attracting teachers into shortage subjects. Two-year teaching programme option for HEI graduates via streamlined process. Annual provision for competence enhancement opportunities for 500 school leaders and staff, focusing on STEAM, until 2028. Financial incentives and international development opportunities to attract professionals from other Some Progress  
 
 
      
 
Table (continued) 

Source:  Lithuania’s reporting and Commission assessment 

37 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  disciplines. 6.3 Address the skills mismatch by increasing the labour market relevance of higher education,  Continued initiatives: STRATA’s Human Capital Status Reports, study field evaluations by SKVC and RRP incentive-based funding   Preparations are being made for the 2028 performance evaluation of higher education institutions  Limited Progress 6.4 promoting the acquisitions of green skills Implementation of competence-based curricula which is aligned with the European Commission's GreenComp framework. Supported SMEs in green transitions.  Effectively enhanced green skills acquisition by updating vocational education programmes. Substantial Progress 6.5 improving adult learning including for unemployed people, low-skilled people and other vulnerable groups,  The following measures were introduced or improved: acquiring high value-added qualifications and competences (AHVQ), learning platform www.kursuok.lt, improvement of the access to vocational training for people with special needs and from disadvantaged socio-cultural context in the regions, measures for drop-outs from vocational training reduction. A pricing system was developed  KURSUOK system is going to be developed further Some Progress 6.6 and increasing the coverage of active labour market policies, including through improved incentives to participate  In 2025, the country reformed its unemployment benefit system, aiming to increase the incentives for the unemployed to return to work. New counselling system for persons in debt, partial compensation of transportation costs for people participating in the active labour market policies, additional incentives for employers participating in the employment under an apprenticeship, subsidized employment. Improving the targeting and effectiveness of Active Labour Market Policies. Simplification of documentation and improvement of participant selection criteria. 22 Regional career centres providing career planning services should operate by the end of 2026. Debt consultants have to complete 40 academic hours trainings. Limited Progress   
 
     
 
FISCAL 
ANNEX 2: FISCAL DEVELOPMENTS AND DEBT SUSTAINABILITY 

in 

strategy 

line  with 

This annex discusses selected topics in public 
finances  and  developments  on 
fiscal-
structural  country-specific  recommendations 
(CSRs)  addressed  to  Lithuania  in  July  2025. 
These  CSRs  include  a  call  to  increase  defence 
spending  and  readiness  while  implementing  a 
the  Council 
fiscal 
Recommendation  of  8  July  2025.  Lithuania  was 
also  called  on  to  provide  adequate  financing  for 
healthcare,  social  protection  and  general  public 
improve  tax  compliance  and  to 
services,  to 
broaden  the  tax  base  to  sources  less  detrimental 
to growth. On 8 July 2025, the Council adopted the 
Recommendation  endorsing  Lithuania’s  medium-
term  fiscal-structural  plan  (10),  which  includes  a 
fiscal adjustment over four years. On 8 July 2025, 
the  Council  also  activated  the  national  escape 
clause  for  Lithuania  in  order  to  facilitate  the 
transition  to  higher  levels  of  defence  spending 
(11)(12). 

Developments in government balance, 
debt and public expenditure (13) 

At  the  end  of  2025,  Lithuania’s  government 
deficit was 1.8% of GDP and the government 
debt-to-GDP  ratio  stood  at  39.5%.  According 
the  Commission  Spring  2026  Forecast, 
to 
Lithuania’s  government  deficit  is  projected  to 
increase to 2.2% of GDP in 2026 and 2.7% of GDP 
in  2027.  The  main  reasons  for  this  are  the 
projected  increase  in  i)  expenditure  relating  to 
national 
iii) 
intermediate  general  government  consumption 
and  public  wages,  and  iv)  interest  expenditure. 
General  government 
to 
increase  due  to  factors  such  as  i)  higher  excise 

ii)  social  spending, 

investments, 

is  forecast 

revenue 

(10)  OJ C, C/2025/3959, 08.08.2025, 

http://data.europa.eu/eli/C/2025/3959/oj  

(11)  OJ C, C/2025/3970, ELI: 

http://data.europa.eu/eli/C/2025/3970/oj 

(12)  Compliance by Lithuania with the maximum growth rates of 
net expenditure recommended by the Council is assessed in 
COM(2026)200 

(13)  Figures underpinning fiscal surveillance (net expenditure 
growth) are provided in the Fiscal Statistical Tables 
(SWD(2026)200) providing background data relevant for the 
assessment of the budgetary policies of the Member States. 

duties  on  polluting  fossil  fuels,  ii)  the  abolition  of 
the  VAT  exemption  for  central  heating  and  hot 
water  supply,  iii)  the  introduction  of  a  security 
contribution,  iv)  the  increase  in  the  corporate 
income tax rate, and v) the increase of excise rates 
on  tobacco  products  and  electronic  cigarettes. 
However,  the  projected  increase  in  revenue  is  not 
expected to fully offset the higher expenditure. 

limited  progress 

Lithuania  has  made 
in 
addressing  the  CSR  to  provide  adequate 
financing  for  social  protection  and  public 
services.  Policy  areas  such  as  healthcare,  social 
protection  and  general  public  services  (14)  remain 
underfunded: the current budget and the medium-
term  budgetary  plan  fall  short  of  providing 
sufficient  funding  to  address  structural  spending 
needs in these areas. Social protection expenditure 
stood at 14.7% of GDP in 2024, well below the EU 
average  (19.6%)  (see  Annex  12).  Low  spending 
continues  to  limit  the  poverty-reducing  impact  of 
transfers,  while  gaps  persist  in  the  provision  of 
social services due to the weakness in the current 
funding  model.  Although  Lithuania  finances  some 
social services from the national budget and plans 
to  introduce  individualised  social  service  baskets 
setting  minimum  funding  levels,  social  services 
financed  from  municipal  budgets  remain  uneven 
across  municipalities,  do  not  fully  match  actual 
demand,  and  are  often  characterised  by  long 
waiting  times  and  insufficient  municipal  funding 
(see  Annex  12).  Healthcare  is  also  underfunded, 
with public expenditure at 5.8% of GDP (EU: 7.4%) 
(see  Annex  15).  The  funding  model  of  healthcare 
institutions  lacks  effectiveness  as  revenues  from 
health  insurance  contributions  remain  structurally 
insufficient  to  cover  the  demand  for  and  cost  of 
increasing 
healthcare  services,  contributing  to 
deficit  of  the  National  Health  Insurance  Fund, 
institutions,  unmet 
debts  of 
healthcare 
retaining 
healthcare  staff,  and  one  of  the  highest  out-of-
pocket  payments  for  the  patients  in  the  EU,  with 
pharmaceuticals  and  dental  care  each  accounting 
for  a  third  of  these  payments  (see  Annex  15). 
Spending  on  general  public  services,  which covers 

the  healthcare 

difficulties 

needs, 

in 

(14)  According to the COFOG classification, “general public 

services” refer to expenditure for the overall functioning of 
government, including central administration, legislative and 
executive bodies, fiscal and foreign affairs, public debt 
transactions and general transfers between levels of 
government. 

38 

 
 
 
 
 
 
 
the overall functioning of government, is similarly 
low, at 3.6% of GDP (EU: 6.1%). 

Lithuania has made little progress in making 
its tax system more conducive to growth. The 
authorities  have  adopted a  set  of  revenue-raising 
tax measures, many entering into force in January 
2026  and  linked  to  commitments  under  the 
recovery  and  resilience  plan.  These  include  i) 
reforming  commercial  and  residential  property 
taxation, ii) gradual increases in excise duties (e.g. 
on polluting fuels), iii) an introduction of a new tax 
on  sweetened  beverages,  and  iv)  VAT  base-
broadening  measures  such  as  the  removal  of  the 
reduced rate on heating (see Annex 3). While these 
measures  broadened  the tax  base  and  somewhat 
increased  tax  revenues,  taxation  from  sources 
least  detrimental  to  growth  –  such  as  recurrent 
property taxes – remains among the lowest in the 
EU  (see  Annex  3).  The  recurrent  property-tax 
reform  increased  the  frequency  of  updates  of 
cadastral  values  to  better  reflect  market  prices. 
However,  high  exemptions  for  primary  residences 
and  limited  rate  progressivity  hinder  its  revenue 
potential.  The  tax  system  continues  to  allow 
arbitrage  between  employment,  self-employment 
and  certain  forms  of  business  (see  Annex  3).  As 
regards 
the 
widespread  use  of  pre-filled  returns  have  helped 
reduce the VAT gap to 13.2% in 2024. Challenges 
persist,  however,  and 
the  shadow  economy 
remains above the EU average (see Annex 3). 

compliance,  digitalisation  and 

While  expenditure  with  a  higher  impact  on 
GDP  remained  broadly  stable  over  three 
decades, it has slightly increased since 2019. 
This may be related to the impact of the Recovery 
and  Resilience  Facility,  which  allows  for  a  more 
quality-based  fiscal  strategy.  As  regards  the 
social  protection 
spending, 
composition  of 
accounts  for  the 
largest  proportion  of  total 
expenditure  (around  40%),  followed  by  health 
education and economic affairs (15), each equal to 
or above 10% of total spending. Since 2019, there 
in  public 
has  been  a  substantial 

increase 

(15)  This refers to the set of government activities, policies, and 

expenditures aimed at regulating, supporting, and developing 
economic activity across major sectors, including general 
economic and labour policies, agriculture and natural 
resources, energy, industry, construction, and other economic 
functions not elsewhere classified. Although transport and 
communication, as well as research and development 
activities, are normally considered part of this function, they 
are treated separately in the graph presented. 

expenditure  on  defence,  reflecting  recent  security 
developments  (See  Graph  A2.3).  Spending  on 
research  and  development,  housing,  transport, 
health  and  education  has  risen  more  modestly. 
Despite sustained investment in education, there is 
still  an  urban–rural  achievement  gap,  which  is 
wider  than  the  EU  average  (See  Annex  13  for 
further  details).  By 
contrast,  spending  on 
communication  has  declined.  This  trend  deserves 
attention,  as this  category  is  generally considered 
conducive to growth. 

Graph A2.1: Primary spending evolution and compositional 
change 

Source: Eurostat 
Note: Based on economic literature, the categories considered 
to have the higher growth impact include education, research 
and development, health, transport and communication (See 
Barbiero and Cournede (2013), Gemmel et al. (2016), Lupu et 
al (2018), Cepparulo and Mourre (2020) and OECD (2025)).   

Cost of ageing 

Total ageing-related spending in Lithuania is 
projected  to  rise  by  about  2 pps  of  GDP  by 
2040, to around 18% of GDP, with a further 
1.5 pp  increase  by  2070  (see  Table  A2.1)(16). 
The  overall  increase  is  mainly  the  result  of  a 
projected  rise  in  pensions,  with  smaller  increases 

(16)  The projections are prepared based on the 2024 Ageing 

Report data. 

39 

510152030354045200720082009201020112012201320142015201620172018201920202021202220232024a) Evolution (% of GDP)Primary expenditureSpending with higher impact on GDP (rhs)-1.5-1.0-0.50.00.51.01.52.02.5SocialprotectionOther economicInterestspendingCommunicationEnvironmentCultureGeneralservicesPublicorderHealthTransportEducationHousingR&DDefenceb) Compositional change 2024-2019 (% of total spending) 
 
     
 
Table A2.1: Projected change in age-related expenditure in 2025-2040 and 2025-2070 

Source: 2024 Ageing Report (EC/EPC). 
Note: 2025, 2040, and 2070 projections are prepared based on the 2024 Ageing Report data. 

in  healthcare  and  long-term  care  expenditure. 
Total  spending  on  ageing-related  items  is  set  to 
remain below the EU average. 

decrease 
in  the  replacement  rate  by  2 pps 
between  2025  and  2040  (See  Tables  A2.1  and 
A2.2) (19). 

Public healthcare expenditure is projected at 
4.4% of GDP in 2025 (below the EU average 
of  6.6%)  and  is  expected  to  increase  by  0.4 
pps  by  2040  and  by  a  further  0.4  pps  by 
2070. 

Public  expenditure  on  long-term  care  is 
projected  at  1%  of  GDP  in  2025  (below  the 
EU  average  of  1.7%)  and  is  expected  to 
increase by 0.3 pps of GDP by 2040 and by a 
further 0.6 pps of GDP by 2070. 

National fiscal frameworks 

Public  pension  spending  as  a  proportion  of 
GDP is projected to increase by around 2 pps 
over the next decades and to be more or less 
unchanged thereafter. At around 10% of GDP in 
2070, gross spending on public pension benefits is 
expected  to  be  lower  than  the  projected  EU 
average.  In  2025,  Lithuania  received  a  CSR  to 
increase  the  adequacy  of  old-age  pensions,  while 
maintaining  the  sustainability  of  the  pension 
system.  To  address  this  CSR,  Lithuania  increased 
the  old-age  pensions  in  2026  by,  on  average, 
around 12%. However, the reform of the ‘second-
pillar’ pension scheme (17), i.e. the move to an opt-
in  model  and  expanded  withdrawal  possibilities 
since the beginning of 2026, is expected to reduce 
participation 
this  supplementary  pension 
scheme  and  may  undermine  future  pension 
adequacy.  

in 

Supplementary  pension  schemes  can  boost 
the  resilience  of  the  pension  system  by 
diversifying  sources  of  retirement income.  In 
Lithuania, however, there has been limited uptake: 
by  the  end  of  2024,  private  pension  assets 
amounted  to  around  12%  of  GDP  while  76%  of 
the  working-age  population  participated  (18).  As 
mentioned  above,  the  pension  reform  is  expected 
to  reduce  participation  in  2026  and  2027.  This 
coincides  with  rising  pressure  on  medium-term 
spending  on  public  pensions  and  a  projected 

(17)  The second pillar is a supplementary pension saving scheme 

which is run by private-sector investment funds. 

(18)  Source: OECD Pension Market in Focus 2025. The highest 

(19)  The (gross) replacement rate refers, depending on data 

participation rate in at least one supplementary pension plan 
is reported.   

availability, to both public and private pensions. It is based 
on projections from the 2024 Ageing Report.  

40 

LT15.71.90.40.3-0.32.318.0LTEU24.30.50.30.4-0.30.925.2EULT15.72.30.80.9-0.33.719.4LTEU24.30.20.60.8-0.31.325.6EUageing-related expenditure change in 2025-2040 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalageing-related expenditure change in 2025-2070 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotal 
 
 
 
 
 
     
 
Table A2.2: Supplementary pension schemes - Scope for expansion 

Source: European Commission. 

Table A2.3: Fiscal Governance Database indicators and Public Accounting Maturity 

(1) "The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level 
based on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. 
The Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
The score for public accounting reflects the degree of maturity in relation to the International Public Sector Accounting Standards 
(IPSAS). Countries with an accounting maturity of 70% or more in relation to IPSAS are deemed to apply accrual accounting. For 
more information, see the report on public accounting in the EU (COM(2025)746 and accompanying Staff Working Document 
SWD(2025)396)." 
Source: Fiscal Governance Database, European Commission 

the  average  size 

The  Budget  Monitoring  Department  (BMD)  of 
the National Audit Office of Lithuania (NAOL) 
is  around 
for  an 
independent  fiscal  institution  (IFI)  and  is 
active in many of the usual areas covered by 
IFIs.  It  uses  its  own  internal  forecast  model  to 
assess government forecasts before endorsement 
decisions. As part of the NAOL the BMD is able to 
enjoy  the  support  of  its 
institution’. 
However,  this  hampers  the  development  of  a 
proper  identity  as  an  IFI  and  impinge  on  its 
freedom to make recruitment and communication 
decisions.  The  BMD  has  undergone  external 
evaluations. 

‘mother 

2050” 

outlines 

Lithuania  has  made  its  public  investment 
management  considerably  more  efficient. 
“Lithuania 
long-term 
development vision rooted in spatial planning and 
is  complemented  by  an 
integrated  national 
progress  plan,  which  presents  10-year  financial 
ceilings  broken  down  by  source  of  financing  (i.e. 
national, EU and other) and main user (20). In order 

a 

(20)  The 2021-2030 National Progress Plan was approved by 
Resolution No 998 of the Government of the Republic of 

41 

It 

is  also 

involved 

to  ensure  that  the  plan  is  fiscally  realistic  and 
affordable, the Ministry of Finance plays a key role 
in coordinating the drafting and implementation of 
in  managing 
the  plan. 
development  programmes.  All  public  investment 
projects, 
including  public-private  partnerships, 
exceeding  EUR 1 million  are  prepared  and 
appraised  in  accordance  with  the  methodological 
rules laid down by the central project management 
agency,  under  the  authority  of  the  Ministry  of 
Finance.  Life-cycle  costs  are  available  for  all 
projects.  There  is  a  standard  methodology  for 
estimating  routine  maintenance  needs  and  costs, 
which is used to estimate life-cycle costs, but this 
does  not  yet  form  part  of  the  decision-making 
process (21). 

Lithuania of 9 September 2020 on the Approval of the 
2021-2030 National Progress Plan.   

(21)  Belu Manescu, C, Cariou-Reynell E., and L. Dimitriadis, 
(forthcoming), Lessons learnt from public investment 
management reforms in the EU, ECFIN Discussion Paper 
Series. 

Assets in 2024 (% GDP)Participation in 2024 (% working-age population)LT12.2-2.076.0LTEU32.4-2.855.9EUGross replacement rate at retirement: (pps change 2025-2040) 2024LithuaniaEU AverageCountry Fiscal Rule Strength Index (C-FRSI)22.0214.81Medium-Term Budgetary Framework Index (MTBFI)0.730.722025 Public accounting maturity of general government85%65% 
 
 
 
 
      
 
 
  
 
ANNEX 3: TAXATION 

This  annex  provides  an 
indicator-based 
overview of Lithuania’s tax system. It includes 
information  on  the  tax  mix,  on  competitiveness 
and fairness aspects of the tax system, and on tax 
collection and compliance. In the area of taxation, 
the  2025  country-specific  recommendations  for 
Lithuania  highlighted  challenges  in  improving  tax 
compliance,  broadening  the  tax  base,  improving 
the design of the tax system and streamlining tax 
incentives for R&D. 

Lithuania’s  tax  revenues  are  rising  but 
rising 
meeting  spending  pressures  and 
defence  expenditure  remains  challenging.  At 
33%  of  GDP,  revenues  remained  considerably 
below  the  EU  average  in  2024  (39.4%),  despite 
increasing by 1.1 percentage points (pps) year-on-
year.  Just  over  half  of  Lithuania’s  tax  revenues 
come  from  labour  taxes,  in  line  with  the  EU 
average  (see  Graph A3.1).  However,  this  still 
revenue  as  a 
leaves  Lithuania’s 
percentage of GDP significantly lower than the EU 
average. Taxes on capital as a percentage of GDP 
are  only  just  over  half  of  the  EU  aggregate. 
and 
Revenues 
environmental 
the  EU 
taxes  were  close 
aggregate as a share of GDP but higher as a share 
of total taxation. 

consumption 

taxes 
to 

labour-tax 

from 

Graph A3.1: Tax revenue by economic function in 2024, LT 
(outer ring) and EU-27 (inner ring) 

Source: Taxation Trends Data, DG TAXUD 

Lithuania  has  reformed  the  tax  system  to 
raise  revenue and  to  reduce  variation  in the 
taxation  of  different  sources  of  income. 
These  changes  are  linked  to  its  country-specific 
recommendation  to  broaden  the  tax  base  and  its 
recovery  and  resilience  plan  commitments  to 
(i) remove  certain  tax  exemptions  and  special  tax 
regimes; (ii) make taxes more growth-friendly, and 
(iii) reduce income inequality and poverty. The new 
government  adopted  a  set  of  tax  reforms  with  a 

42 

net revenue-raising effect, many of which entered 
into  force  in  January  2026.  These  include  the 
aggregation  of  some  but  not  all  types  of  income 
for personal taxation purposes, the introduction of 
more  progressive  personal  income  tax  (PIT)  rates, 
reforms  to  commercial  and  household  property 
taxes,  and  a  further  rise  in  the  corporate  income 
tax (CIT) rate from 16% to 17%, and VAT reforms 
with  a  net  base-broadening  effect.  The  latter 
includes an increase in VAT on heating, hot water 
and  firewood  from  a  9%  reduced  rate  to  the  full 
21% rate. 

Despite  these  measures,  the  income  tax 
system  continues  to  offer  tax  arbitrage 
opportunities,  e.g.  between  employment,  self-
employment,  and  some  forms  of  incorporated 
business.  The  preferential  CIT  treatment  for  the 
smallest  businesses  also  creates  a  cliff-edge 
effect and encourages tax-motivated incorporation 
and  potentially  underreporting.  The  government 
plans  to  reform  the  legal  framework  governing 
various  business  forms.  Under  the  reformed 
recurrent  property  tax,  the  updating  of  cadastral 
values  to market values is up-to-date  and will be 
regularly  updated.  However,  the  exempt  value  for 
primary  residences  is  high,  which  will  continue  to 
limit the revenue yield (see Annex 16). 

Lithuania raises relatively little CIT revenue, 
although the headline rate has risen. In 2024, 
Lithuania’s  CIT  revenues  were  equivalent  to  2.5% 
of GDP, below the EU average of 3.1% and a fall 
of  0.2 pps  compared  with  2023.  Lithuania’s  top 
statutory CIT rate increased from 16% to 17% at 
the start of 2026, though this is still below the EU-
27  average  of  top  statutory  CIT  rates  (around 
21%).  The  country’s  forward-looking  effective  CIT 
rate was 12.4% in 2025, the fifth lowest in the EU 
(the  EU-27  average  was  around  19%).  While  the 
top statutory CIT rate has decreased from 29% in 
1995,  Lithuania’s  effective  average  tax  rate  was 
the same in 2024 as in 2002. Overall, Lithuania’s 
relatively low CIT yield is now driven more by the 
statutory CIT rate than by tax expenditures. 

Dividend  income  received  by  individuals  in 
Lithuania  is  taxed  at  15%,  which  is  slightly 
below  the  top  rate  of  capital-gains  tax  of 
20% and well below the top income-tax rate 
of  32%.  A  special  favourable  regime  with  a  7% 
tax 
the  smallest 
companies,  which  can  act  as  a  distortive 
disincentive to the growth of firms. Lithuania also 
has special economic zones, where it offers firms 

rate  exists  for  some  of 

51.526.821.652.034.014.1Taxes on labourTaxes on consumptionTaxes on capital 
 
   
 
 
Table A3.1: Taxation Indicators 

(1) Forward-looking effective tax rate (KPMG). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2024. EU-27 refers to the median value. For more data on tax revenues as well as the methodology 
applied, see the Data on Taxation Trends webpage. 
Source: European Commission, OECD, ISORA. 

a  tax  holiday  for  the  first  10 years  in  which  they 
conduct business and a 50% tax exemption in the 
following six years. 

Lithuania  provides  quite  beneficial  tax 
treatment  through  a  new  system  of  saving 
and  investment  accounts.  Reforms  to  second 
pillar  pensions  are  though  set  to  reduce  the  pool 
of 
finance  domestic 
investment (see Annex 6). Lithuania has chosen to 
delay the application of some aspects of the EU’s 
Pillar 2  Directive,  which  implements  the  OECD’s 
initiative on a global minimum tax. 

savings  available 

to 

Lithuania  has  developed  but  not  yet  agreed 
proposals to reform the administration of its 
tax  incentives  for  innovation.  As  discussed  in 
Annex 4,  R&D  expenditure  is  relatively  low  in 
Lithuania. In the light of the 2025 country-specific 
recommendation  on  reviewing  and  streamlining 
existing  tax  incentives  for  R&D,  Lithuania  has 
drawn  up  proposals  to  clarify  what  spending  is 
eligible  for  incentives  and  to  simplify  application 
and  payment  processes.  If  taken  forward,  this 
could help to improve the take-up of existing tax-
based support schemes, especially among smaller 
firms.  Lithuania  is  not  currently  taking  steps  to 
streamline the set of tax incentives or to re-orient 
support  towards  grants,  which  may  more  readily 
benefit start-ups that are not yet profitable. 

Lithuania  has  reduced  the 
labour  tax 
wedge (22)  at  low  earnings  levels  in  recent 
years.  Table A3.1  shows  that  the 
labour-tax 
wedge  for  Lithuania in  2025  was  close to the  EU 
average  for  all  earnings  levels  except  at  high 
earnings  where  it  was  below  the  EU  average.  In 
particular,  the  tax  wedge  for  single  workers 
earning 50% of the average wage decreased from 
33.4%  in  2019  to  30.8%  in  2025,  below  the  EU 
average of 31.6%. Second earners at a wage level 
of 67% of the average wage, whose spouses earn 
the average wage, are subject to a tax wedge that 
is lower than the EU average (and equal to the tax 
wedge  of  single  people  at  the  same  wage  level; 
see  Graph A3.2).  Since  2019,  the  ability  of  the 
Lithuanian  tax-and-benefit  system  to  reduce  the 
(as 
high 

level  of  market-income 

inequality 

(22)  The  tax  wedge  is  an  indicator  of  the  tax  burden  on  labour 
that  can  be  assessed  at  various  levels  of  earnings.  It  is 
defined as the sum of personal income taxes, employee and 
employer  social-security  contributions  and  other  mandatory 
contributions,  expressed  as  a  percentage  of  total  labour 
costs  (the  sum  of  the  gross  wage  and  social-security 
contributions  paid  by  the  employer).  Tax  wedge  data  in  the 
2026  country  reports  are  calculated  by  the  Joint  Research 
Centre  of  the  European  Commission  and  based  on  the 
EUROMOD model, while in the past country reports they were 
based  on  the  OECD  tax  and  benefit  model.  While  the 
underlying  methodology  is  very  similar,  differences  in  the 
assumptions  can  lead  to  different  results  between  both 
models. 

43 

Median (EU-27)2019202220232024202520192022202320242025Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)30.332.031.933.039.939.739.039.4Taxes on labour (% of GDP)15.316.016.317.120.620.119.920.3of which, social security contributions (SSC, % of GDP)9.69.910.210.613.012.712.713.0Taxes on consumption (% of GDP)11.511.610.911.211.210.910.510.6of which, value added taxes (VAT, % of GDP)7.88.48.08.17.17.47.17.1Taxes on capital (% of GDP)3.54.44.84.68.18.78.58.5Personal income taxes (PIT, % of GDP)7.27.67.78.09.69.49.39.6Corporate income taxes (CIT, % of GDP)1.52.32.72.52.63.23.23.1Total property taxes (% of GDP)0.40.40.40.42.22.11.91.8Recurrent taxes on immovable property (% of GDP)0.30.30.30.31.21.00.90.9Environmental taxes (% of GDP)2.01.71.71.82.62.12.12.1Effective carbon rate in EUR per tonne of CO2 equivalentsnana61.8nanana84.8naTax wedge at 50% of average wage (single person) (*)33.431.531.430.330.832.431.631.531.531.6Tax wedge at 100% of average wage (single person) (*)38.439.039.539.840.140.139.739.939.940.0Corporate income tax - effective average tax rates (1) (*)12.412.412.412.420.019.219.019.3Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)5.87.77.77.47.88.07.97.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)4.84.53.8na31.832.630.7naVAT gap (% of VAT total tax liability, VTTL) (**)20.912.215.113.210.57.38.2naEU-27LithuaniaProgressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
 
   
 
measured  by  the  system’s  ability  to  reduce  the 
Gini  coefficient (23))  has  increased  to  7.4 pps, 
remaining slightly below the EU average of 7.8 pps 
in 2024 (see Table A3.1). Tax changes coming into 
effect in 2026 include the introduction of a middle 
tax  bracket  of  25%  between  the  existing  lower 
20%  bracket  and  the  top  bracket  of  32%.  This  is 
expected 
the 
progressivity of the PIT  system. Average effective 
tax  rates  for  labour  are  somewhat  higher  than 
those for capital. 

revenue  and 

increase 

tax 

to 

Graph A3.2: Tax wedge for single and second 
earners as a % of total labour costs, 2025 

Note: The second earner tax wedge assumes a 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  reports  tax  expenditures  annually, 
and breaks down the total into the main tax 
types  and  several  individual  exemptions. 
Generally  speaking,  tax  expenditures  as  assessed 
reporting  are 
in  Lithuania’s  analysis  and 
exceptions  within  the  tax  system.  They  take  the 
form  of  allowances,  deductions,  exemptions,  rate 
reductions  and  reliefs  or  tax  credits,  which  affect 
the amount of tax paid. The budgetary costs of tax 
expenditures  are  only  estimated 
tax 
expenditures  which  are  not  mandatory  under  EU 
legislation.  Depending  on  the  tax,  there  can  be 
multiple  benchmarks  defining  whether  something 
is considered a tax expenditure.  

for 

Overall,  the  methodology  for  defining  a  tax 
expenditure  is  quite  broad.  This  is  partly 

(23)  The  Gini  coefficient  measures  the  extent  to  which  the 
distribution  of  income  within  a  country  deviates  from  a 
perfectly  equal  distribution.  A  coefficient  of  0  expresses 
perfect equality where everyone has the same income, while 
a coefficient of 100 expresses full inequality where only one 
person has all the income. 

tax  expenditures  were 

because  it  includes  the  non-taxable  amount  of 
personal income in the PIT tax expenditure figures. 
In  the  last  State  budget  revenue  report  (covering 
2023), 
reported  as 
amounting  to  EUR 3 490 million  or  4.8%  of  GDP. 
Of  this:  EUR 528 million  (0.7%  of  GDP)  was  tax 
expenditures  in  the  VAT  system;  EUR 329 million 
(0.5%  of  GDP)  tax  expenditures  in  excise  duties; 
EUR 855 million (1.2% of GDP) tax expenditures in 
the  CIT  system;  and  EUR 1 778 million  (2.5%  of 
GDP)  tax  expenditures  in  the  PIT  system.  These 
headline  tax  expenditure  estimates  may  not  fully 
capture  revenue  foregone  as  a  result  of  special 
regimes  for 
income  from  different  sources. 
Lithuania’s  VAT  policy  gap  was  estimated  at 
around 35% of the notional ideal revenue in 2024, 
well below the EU median of around 47%. 

Lithuania has a programme for assessing tax 
gaps  but  does  not  publish 
its  own 
estimates (24).  The  State  Tax  Inspectorate  (STI) 
assesses  VAT  and  PIT  gaps  using  different 
methodologies.  Other  tax  gaps  are  not  assessed. 
The  PIT  gap  is  assessed  using  STI’s  bottom-up 
methodology.  The  VAT  gap  is  assessed  using  two 
top-down approaches (EC and IMF) and a bottom-
up approach developed by the STI. The VAT gap is 
assessed  partly  with  external  support.  The  STI 
the  EC’s  annual,  VAT  gap 
participates 
assessment  and  also 
own 
performs 
assessment  using  the  EC  methodology.  With  the 
exception of the Commission’s published VAT gap, 
the other tax gap estimates are not published but 
are used internally. 

its 

in 

issues, 

though  much 

VAT  compliance  and  the  shadow  economy 
remain 
tax 
administration is now digital. After a period of 
significant  falls  in  Lithuania’s  long-elevated  VAT 
compliance  gap  followed  by  an  upward  blip  in 
2023, it decreased to 13.2% in 2024. The size of 
the  shadow  economy  in  Lithuania  is  estimated  to 
be  above  the  EU  average,  with  envelope  wages 
remaining  a  significant  issue.  Lithuania  offers 
electronic  tax  filing,  which  is  widely  used  by 
taxpayers. Lithuania is one of the few EU Member 
States  to  provide  pre-filling  facilities  for  PIT,  CIT 
(partial)  and  VAT  returns.  Tax  arrears  in  Lithuania 
are well below the EU  average and have fallen in 
recent years. 

(24)  European Commission, Directorate-General for Taxation and 

Customs Union, Mind the gap - 2025 report. 

44 

30.835.740.140.635.72025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - LTSingle earner - EU averageSecond earner -  LTSecond earner -  EU average 
   
 
 
compliance. 

Through  its  recovery  and  resilience  plan, 
Lithuania is continuing to implement a range 
of  actions  to  strengthen  tax  administration 
and 
include: 
(i) digitalisation projects; (ii) improving IT tools like 
taxpayer 
(iii) the 
automatic  collection  of  data  on  transactions;  and 
(iv) training  to  improve  the  skills  of  tax  and 
customs specialists. 

assessments; 

risk-profile 

actions 

These 

A  number  of  steps  have  been  or  are  being 
taken  to  reduce  the  size  of  the  shadow 
economy  and  make  tax  administration  more 
efficient. These include measures to: (i) introduce 
electronic  receipts;  (ii) limit  cash  transactions; 
(iii) regulate  the  sale  of  used  vehicles;  and 
(iv) track  alcohol  sales.  The  i.KON  system  to 
automate  monitoring  and  control  of  taxpayers, 
which  was  launched  in  2022,  is  being  upgraded. 
Lithuania  has  implemented  a  system  to  identify 
discrepancies  in  VAT  returns  and  notify  taxpayers 
in  real  time.  Lithuania  is  conducting  a  technical 
assistance project with the IMF to help reduce the 
shadow  economy  and  VAT  gap  and  improve  tax 
administration and collection. 

45 

 
PRODUCTIVITY 
ANNEX 4: INNOVATION TO BUSINESS  

of 

the 

‘moderate 

innovation 

development 

research  and 

the  EU  average 

Further 
Lithuania’s 
innovation  performance  is  hampered  by  the 
institutional  and  structural  weaknesses  of 
the public science base and the underfunding 
of 
(R&I) 
ecosystem.  Lithuania  has  maintained  its  ranking 
in  the  European 
innovator’ 
as  a 
Innovation  Scoreboard.  Its  score  on  the  Summary 
Innovation  index  has  grown  faster  than  the  EU 
average  since  2018  (+17.4%  points  vs  +12.6% 
points  for  the  EU),  although  it  is  still  below  the 
innovators  group 
average  for  the  moderate 
(81.0%  of 
in  2025).  The 
improvements  are  thanks  notably  to  outstanding 
performances  in  venture  capital  expenditure  and 
cloud  computing. 
In  2024,  Lithuania’s  R&D 
intensity  maintained  the  same  value  as  in  2023 
(1.04%  of  GDP).  Public  R&D  intensity  has  slightly 
increased  from  its  historical  low  of  2022  and 
maintained the same value for the last two years 
(0.61%  of  GDP  during  2023-2024).  Business 
expenditure on R&D, at 0.43% of GDP in 2023 and 
2024,  dropped  back  from  its  historical  high  of 
2021  (0.54%  of  GDP)  and  continues  to  be  more 
than  three  times  below  the  EU  average.  Public 
science 
structural 
institutional 
base 
further 
weaknesses  hold  back 
development,  research  breakthrough  and  science-
business  cooperation.  The  2025  country-specific 
recommendation  (CSR)  called  on  Lithuania  to 
facilitate 
in 
particular the need to improve the effectiveness of 
tax 
incentives  for  R&D  and  to  address  the 
fragmentation  of  the  public  science  base  with  a 
view to fostering science-business linkages. 

and 
Lithuania’s 

in  R&D,  highlighting 

investment 

Excellent science 

Public  research  base  underfunding  and 
fragmentation  remain  major  obstacles  to 
further  improvement.  The  overall  quality  of 
Lithuania’s  scientific  production  still  lags  well 
below  the  EU  average,  although  the  country  has 
made  significant  progress  over  the  last  decade. 
The  share  of  scientific  publications  within  the  top 
10%  most-cited  publications  worldwide  as  a 
percentage of total publications stood at 5.52% in 
2022  (EU  average:  9.44%).  Public  expenditure  on 
R&D as a percentage of GDP was slightly higher in 
in  2021-2022,  although  a 
2023-2024  than 

decade  ago  Lithuania  had  registered  even  higher 
values (25).  The  recent  increase  is  the  result  of 
implementing  the  2021  national  agreement  to 
reach  a  level  of  public  support  for  R&D  from 
national  sources  equal  to  1%  of  GDP  by  2030. 
Since  2022,  funding  from  national  sources  has 
increased progressively, and in 2024 reached 0.45 
%  of  GDP,  with  a  forecasted  value  of  0.51%  for 
2025(26).  This  is  combined  with  the  allocation  of 
these  additional  resources  to  the  public  science 
base. Lithuania is so far on track to implement its 
national target and the 2025 CSR on facilitation of 
investment  in  R&D  as  regards  the  funding  of  the 
public R&D sector.  

improving 

The  public  research  base  lacks  critical  mass 
to  reach  excellence.  As  reflected  in  the  2025 
CSR  on 
the  university  network, 
Lithuania’s public science base is fragmented, with 
7  colleges,  11  universities  and  11  research 
institutes.  This  fragmentation  prevents  Lithuanian 
public institutions from reaching critical mass, thus 
quality 
impeding 
breakthrough  research  and  its  commercialisation. 
Such  a  fragmented  system  is  not    competitive  in 
the  international  research  and  higher  education 
space, except in niche cases. Over the past decade, 
Lithuania  has  received  the  same  advice  from  the 
OECD,  the  IMF (27)  and  the  European  Commission 
to consolidate research-performing institutions.  

production 

higher 

of 

structural 

(RRP),  Lithuania  has 

is  addressed 
of 

through  a 
Fragmentation 
combination 
reforms, 
regulatory measures and performance-based 
evaluations.  Under  its  recovery  and  resilience 
plan 
carried  out  a 
consolidation of colleges. This led to four mergers, 
consisting of three college-to-college mergers and 
one college merging with a university. As one more 
merger  was  carried  out  outside  of  the  RRP,  five 
mergers  were  performed  in  total.  Lithuania  has 
also  set  up  under  its  RRP  a  legal  framework  for 
mergers among universities but has not allocated 
dedicated  funding  for 
this  process.  Funding 
mechanism  is  envisaged  in  case  an  institution 
initiates  reorganisation  and  is  subject  to  the 
Government or parliamentary decision. To date no 

(25)  Eurostat, Public expenditure on R&D as % of GDP value 0.76 

in 2015 vs 0.61 in 2024. 

(26)  Lithuania’s State Data Agency. 

(27)  IMF, Republic of Lithuania Selected Issues 2025. 

46 

 
 
 
 
 
 
of 

view 

higher 

universities  have  announced  any  intention  to 
merge.  Starting  in  2028,  Lithuania  plans  to  carry 
out  a  comprehensive  performance  evaluation  of 
the  entire  public  research  base  —  universities, 
colleges,  and  research  institutes.  The  assessment 
cycle will consist of two complementary exercises: 
(1) expert evaluations of R&D and artistic activities 
(conducted  by  the  Research  Council  of  Lithuania), 
and  (2)  institutional  external  evaluations  (carried 
out by the Centre for Quality Assessment in Higher 
Education).  The  primary  aim  is  to  ensure  a 
comprehensive 
education 
institutions’ performance, covering both the quality 
of  research/artistic  outputs  and  the  effectiveness 
of  governance  and  internal  quality  assurance 
systems.  The 
institutional  external  evaluation, 
based  on  the  new  model  now  in  development,  is 
planned  to  start  after  the  completion  of  the  R&D 
assessment,  in  2029–2030.  The  process  will 
continue  with  higher  education  network  analysis 
planned  for  2029,  which  will  assess  institutional 
performance  efficiency, 
results  of  external 
evaluations, trends in performance indicators, and 
future  development  prospects.  These  processes 
are  expected  to  introduce  higher  and  clearer 
thresholds  for  R&D  and  study  quality  thus 
incentivising  institutions  to  consolidate  resources, 
build critical mass, focus on areas of strength and 
trigger  reorganization  processes  where  needed. 
The first steps toward implementation of the 2025 
CSR  on  improving  the  university  network  are  thus 
expected to occur in 2028.  

Despite  many  policy  initiatives,  cooperation 
between  business  and  research-performing 
institutions  remains  limited,  hindered  by  the 
institutional  and  structural  weaknesses  of 
the  public  science  base.  Lithuania  ranks  last  in 
the  EU  on  public-private  scientific  co-publications 
total  number  of 
as  a  percentage  of 
publications (28). 
from 
flows 
The 
businesses  to  higher  education  and  research 
institutions  reach  only  a  third  of  the  EU  average 
and  show  downward  trend  since  2014(29).  Overall 
business  investment  in  R&D  remains  three  times 
lower  than  the  EU  average  too.  Under  the  RRP, 
Lithuania  is  implementing  three  mission-based 
research and innovation programmes. These bring 

the 
financial 

public 

period. 

Lithuania 

institutions 

together 
and 
research 
businesses  to  achieve  the  common  goals  of 
developing breakthrough science and technologies, 
creating  new  products  and 
services,  and 
establishing  spin-off  companies.  Three  consortia 
will  establish  competence  centres,  which  will 
continue  to  operate  after  the  end  of  the  RRP 
implementation 
continues 
support programme for innovation and technology 
in  public  research-performing 
transfer  offices 
institutions.  The  programme’s  aim  is  to  promote 
knowledge  transfer  and  commercialisation,  bridge 
develop 
and 
business, 
and 
science 
entrepreneurship 
skills.  The  business  PhDs 
programme has been strengthened with additional 
to 
funding  allocation 
  The 
motivate 
intellectual property  of knowledge created in joint 
projects    can  be  flexibly  administered  and  shared 
between  scientists  and  businesses.  However,  not 
all  potential  business  collaborators  are  aware  of 
this  flexible  regime,  so  raising  awareness    would 
be  warranted.  Despite  the  positive  developments 
mentioned above as highlighted in the 2025 CSR, 
institutional  and  structural  weaknesses  of  the 
public  science  base  remain  a  hindrance  to 
developing  stronger  cooperation  and  synergies 
between 
and 
research 
businesses, preventing Lithuania from reaching its 
full innovation potential.  

to  companies’  participation. 

to  businesses,  aiming 

institutions 

public 

share 

Agency 

The  institutional  set-up  for  delivering  public 
support  to  research  and  innovation  is  still 
experiencing 
inefficiencies.  The  Research 
Council  of  Lithuania  and  the  Central  Project 
responsibilities 
Management 
throughout  the  funding  cycle,  from  call  design  to 
project selection and funding. This is a key reason 
for  process  inefficiency,  accompanied  by  lack  of 
administrative and expert capacity in the Research 
Council. For the Research Council to become a fully 
functional  one-stop  shop  delivering  high-quality 
support  to  researchers  as  the  Innovation  Agency 
does  for  businesses,  it  would  be  beneficial  to 
strengthen  its  administrative  and  expert  capacity 
in  the  short  term  and  to  further  adjust  the 
institutional set-up post-2027.  

(28)  Eurostat, value 5.37 in 2024. EU average is 7.62. 

Business innovation   

(29)  Eurostat, Public expenditure on R&D (GOVERD plus HERD) 
financed by business enterprise (national) % of GDP, value 
0.02 in 2023, compound annual growth from 2014 to 2023 
equals to -15.39 %. EU average is 0.06. 

Business  investment  in  R&D  remains  very 
low. Business enterprise expenditure on R&D as a 

47 

 
 
percentage of GDP has stagnated since 2020 and 
even  decreased  in  the  last  two  years,  reaching 
0.43%  in  2024.  Lithuanian  business  continues  to 
invest  in  R&D  three  times  less  than  the  EU 
average (1.49 % of GDP in 2024). The government 
has  set  a  goal  of  increasing  business  investment 
in R&D to 1% of GDP in 2030, but so far Lithuania 
is not on track to reach its target. 

Graph A4.1: R&D investment as a percentage of GDP, 2010-
2024 

Source: Eurostat 

a 

indicates 

The  Lithuanian  authorities  have  developed 
initiatives  to  facilitate  investments  in  R&D. 
The  2025  CSR  called  on  Lithuania  to  facilitate 
investment 
innovative 
in  R&D  and  support 
capacity. In response, the government is promoting 
a  shift  towards  integrated  and  effective  R&D 
financing, with a focus on the smart specialisation 
strategy (S3). This was renewed under the RRF and 
includes  areas  such  as  (1)  biotechnologies,  safe 
food, (2)  new  production processes,  materials  and 
energy  efficiency,  (3)  ICT  technologies,  inclusive 
and  creative  society.  The  growing  share  of  S3 
structural 
sectors 
transformation  of  the  Lithuanian  economy,  with 
increasing numbers of companies and employees, 
and  expanding  productivity  levels  and  exports.  To 
unlock  further  growth,  the  S3  would  benefit  from 
fewer,  deeper  and  more  capability-anchored 
areas (30). New support initiatives were introduced, 
notably  two  measures  both  aimed  at  SMEs.  The 
the  development  of  AI 
first 
technologies,  particularly  in  the  regions,  while  the 
second  supports  the  deployment  of  AI-based 
solutions  to  upgrade  processes  and  develop  new 
digital  services. In addition, Lithuania has enabled 
cohesion  policy  financing  to  be  used  for  three 
other  measures.  The  first  most  notable  of  these 
supports  cutting-edge technologies in the defence 

focuses  on 

long-term 

on 

focus 

policy 

security 

products 

launched 

development 

and 
the  Strategic 
sector  under 
Technologies  for  Europe  Platform  (STEP)  and  the 
development  of  advanced  materials,  technologies 
and  prototypes  for  the  transition  to  climate 
neutrality.  The  other  two  measures  financed  by 
pre-commercial 
cohesion 
procurement  of  innovative  products  and  solutions 
and on funding the development of AI solutions in 
the  country’s  Central  and  Western  Lithuania 
‘Billion  for 
Region’.  The  previously 
Business’  national 
loan  facility  continues  to 
support technology adoption, production expansion 
and the scaling of innovative companies. Initiative 
‘Encouraging  innovation  supply’  boosts  new  high 
value-added 
and 
researchers’ recruitment in companies. Meanwhile, 
the  Green  corridor  initiative  and  free  economic 
zones  ensure  fast-track  permitting  and  long-term 
tax 
industrial  and  R&D 
large 
investments.  Besides  the  support  measures,  in 
2026  Lithuania  plans  to  establish  a  national  AI 
factory  known  as  ‘LitAI’.  This  will  be  a  state-of-
the-art  centre  dedicated 
to  developing  and 
applying  AI  technologies.  The  facility  will  be  the 
largest  AI  facility  in  the  Baltic  states,  co-financed 
by  the  EuroHPC  Joint  Undertaking.  Lithuania  has 
set  a  goal  of  life  sciences  contributing  to  around 
5%  of  GDP  by  2030  and  to  Lithuania  positioning 
itself  as  a  leading  European  hub  for  advanced 
technologies. While these initiatives will address to 
some  extent  the  2025  CSR  on  facilitation  of 
investment  in  R&D,  they  are  not  sufficient  for 
enterprise 
Lithuania 
expenditure  on  R&D  as  a  percentage  of  GDP 
threefold, enabling it to reach the EU average. 

incentives  for 

business 

increase 

to 

Lithuania is preparing changes to its R&D tax 
incentives 
Lithuania’s 
framework.  While 
available  tax  incentives  for  business  R&D  are 
generous,  only  few  firms  take  advantage  of 
them (31).  Following  the  2025  CSR  on  reviewing 
and  streamlining  existing  tax  incentives  for  R&D, 
Lithuania  is  preparing  to  adjust  its  R&D  tax 
incentives  framework  to  make  it  more  accessible, 
predictable and business-friendly, which could lead 
to  greater  use  of  these  incentives  by  companies. 
This 
documentation 
simplifying 
requirements  and  defining  eligible  R&D  activities 
more  clearly.  Under  the  proposal,  the  Innovation 
Agency  would  be  authorised  to  issue  expert 
assessments 
company 
activities  qualify  as  R&D.   In  addition,  Lithuania 

confirming  whether 

entails 

(30)  Smart Specialisation Monitoring Report, 2025. 

(31)  OECD, Economic Survey Lithuania, 2025. 

48 

00.20.40.60.811.21.41.6201020152020202220232024LT public R&D % GDPEU average public R&D % GDPLT business R&D % GDPEU average business R&D % GDP 
  
 
 
plans  to  develop  a  mechanism  specifying  cases 
when  companies’  declared  activities  would  not 
require  additional  verification  and  be  considered 
as  eligible  R&D  activities.  As  of  2026, 
amendments to the laws on corporate income tax 
and  personal  income  tax  allow  companies  to 
deduct:  (i)  scholarships  for  researchers  carrying 
out  R&D  projects  (without  limits  on  the  amount); 
and  (ii)  scholarships  for  students  studying  in  the 
fields of mathematics, life sciences, engineering or 
technology  (up  to  EUR 2 500  per  tax  period).  For 
individuals,  such  scholarships  are  treated  as  non-
taxable income. So far, the implementation of the 
2025  CSR  on  tax  incentives  for  R&D  is  in  the 
preparatory stages. 

international 

collaboration 

technological 
integration 

Lithuania  is  focusing  on  strengthening  dual-
innovation  ecosystem, 
use  and  defence 
building 
and 
resilience, 
deepening 
in  EU  and  NATO 
strategic  R&I  programmes.  The  comprehensive 
national  package  for  defence-related  innovation 
includes  support  for  creating 
the  necessary 
the  acquisition  of  production 
infrastructure, 
experimentation, 
technological 
equipment, 
prototyping  and  testing,  and  participation 
in 
international defence exhibitions. Support schemes 
innovation  vouchers,  Strategic 
like  defence 
Technologies  for  Europe  Platform  and  the Miltech 
Sandbox  are  accelerating  existing  processes  and 
strengthening 
in 
photonics,  cyber-security,  autonomous  systems, 
semiconductors  and  AI.  Given 
the  current 
geopolitical  situation,  the  Lithuanian  authorities 
are  trying  to  help  Lithuanian  companies  to 
integrate  into  international  defence  and  security 
production  and  supply  chains,  start providing  high 
value-added  products  themselves,  and  carry  out 
R&I  relevant  to  the  business  sector.  As  of  2025, 
companies  working  on  projects  of  strategic 
importance  with  NATO,  the  EU  or  Ukraine  are 
eligible for specific legal exemptions or regulatory 
facilitation.  Under  the  mid-term  review  of  the 
cohesion  policy  funds  programme,  Lithuania  has 
diverted  significant  budgetary 
to 
measures  strengthening  the  defence  and  security 
industry  capabilities. 
In  response  to  growing 
security  threats  and  hybrid  provocations,  the 
country  has  launched  an  initiative  to  develop 
innovative  technological  solutions  for  airspace 
security.  

resources 

Adoption  of  advanced  digital  technologies 
continues to increase. Lithuania’s share of SMEs 
with  at  least  a  basic  level  of  digital  intensity 

49 

(71.39%). For  advanced 

(54.11%  vs  39.85%  EU), 

reached  73.51%  in  2025,  slightly  above  the  EU 
technologies, 
average 
Lithuania performs  above  the  EU  average  in data 
analytics 
cloud 
computing  (54.90%  vs  46.69%  EU),  and  artificial 
intelligence  (21.30%  vs  19.95%  EU). To  support 
further uptake, Lithuania continues to rely on SME 
support  tools  such  as  the  ‘Digitalisation  of  SMEs’ 
measure  and  ‘Digital  SME  Vouchers’, which  cover 
including  cloud  services. 
eligible  expenditures 
Complementary  support  is  also  available  through 
regional  ‘hives’  and  accelerators.  Lithuania  relies 
on its network of three European Digital Innovation 
Hubs,  which  delivered  large  volumes  of  digital 
maturity  assessments  and  advisory  services  in 
2024,  positioning  them  as  key  enablers  of  digital 
transformation for SMEs.  

Entrepreneurial dynamism 

The  start-up  ecosystem  has  expanded 
further.  Lithuania  is  a  home  to  over  1 300 
start-ups,  mostly  clustered  in  the  capital  region. 
During  2020-2025,  the  top  sectors  to  receive 
investment  were  enterprise  software,  fintech, 
security  and  health.  Over  the  last  five  years, 
growth  in  the  number  of  deep  tech  and  fintech 
start-ups  has  slowed  compared  with  the  2010-
2020  period.  However,  the  AI  segment  grew 
significantly  and  now  accounts  for  26.3%  of  all 
start-ups (32).  Lithuania  raised  four  homegrown 
unicorns (33)  and  contributed  to  the  growth  of 
another  six.  According  to  the  Global  Innovation 
Index,  the  combined  value  of  Lithuania’s unicorns 
equals  9.55%  of GDP (the highest  share globally), 
underscoring 
the  country’s  attractiveness  for 
innovation  and  investment.  Via  a  snowball  effect, 
former  employees  of  the  unicorn  Vinted have 
founded  around  18  start-ups of  their  own,  some 
of  which  have  attracted  outside  investment.  Only 
26%  of  Lithuanian  scale-ups  have  moved  their 
headquarters abroad, the lowest relocation rate in 
Central  and  Eastern  Europe  countries  (CEE).  This 
indicates  that  Lithuania  is  founder-friendly  at 
talent  and 
scale,  with 
later-stage 
ecosystem 

infrastructure, 
support 

the 
depth 

to 

(32)  The Lithuanian Startup Ecosystem 2025. 

(33)  New companies with a market capitalisation of over one 

million dollars. Lithuania’s unicorns are Vinted, Nord Security, 
Baltic Classifieds Group and CAST AI. 

 
 
growth (34). Overall, the combined enterprise value 
of  start-ups  founded  in  Lithuania  grew  5.9  times 
between  2020  and  2025,  against  a  growth 
average  of  1.6  in  CEE  countries.  This  makes 
Lithuania  the  fastest-growing  start-up  ecosystem 
in the region (35) .  

Start-ups are finding investment in both the 
early  and  late  stages  of  growth  and  are 
benefiting  from  favourable  tax  changes. 
While  the  venture  capital  market  in  Lithuania  is 
more  developed  than  in  neighbouring  Latvia,  it  is 
significantly  lagging  behind  Estonia (36)  (0.03%  vs 
0.2% of GDP in 2024) (37). However, start-ups are 
so  far  finding  opportunities  for  sufficient  early-
from  Lithuanian  domestic 
stage 
financing 
this  segment.  Besides 
lead 
investors,  which 
Lithuanian  investors,  early-stage  start-ups  also 
attract  significant  interest  from  US  and  Estonian 
investors,  while  the  breakout  and  late  stages  are 
primarily backed by UK and US investors. Lithuania 
has  no  domestic  investor  in  the  growth  and  late-
stage segments(38). As of 2026, a new tax reform 
further incentivises people to hold option shares in 
start-ups,  by  applying  a  flat  personal  income  tax 
rate of 15% on subsequent sales, thus exempting 
them  from  the  new  progressive 
income  tax 
brackets.  In  addition,  the  tax  holiday  for  newly 
incorporated  companies  with  limited  revenue  has 
been  doubled  and  now  runs  for  two  years  – 
corporate  income  tax  rate  is  0%.  However,  the 
post-incentive rate was increased to 7% (from 6% 
in 2025). 

continue, 

shortages 

Talent 
although 
Lithuania  has  dedicated  policy  initiatives  to 
addressing it. According to Eurostat, the share of 
computing  graduates  in  the  population  aged  25-
34  has  strongly  increased  over  the  last  decade, 
despite  a  small  dip  in  2022-2023  (3.16%  vs 
3.11%; the lowest value was 1.57% in 2015). The 
share of graduates in science and engineering had 
an  opposite 
the  numbers  sharply 
diminished,  including  during  2022-2023  (11.89% 
vs  11.70,  with  a  peak  of  22.49%  in  2013).  To 
counteract  this  trend,  the  2025  CSR  called  on 
in  post-
Lithuania 

incentivise  enrolment 

trend  – 

to 

(34)  The Lithuanian Startup Ecosystem 2025. 

(35)  Ibid. 

(36)  OECD Economic Surveys: Lithuania 2025. 

(37)  Capital Markets Union Dashboard, 2025. 

in  science, 

to  address 

secondary  education 
technology, 
engineering  and mathematics  (STEM).  While  there 
were  no  new  measures 
these 
recommendations,  Lithuania  continued  several 
initiatives  in  2025  dedicated  to  addressing  the 
shortage of talent in STEM. Particularly noteworthy 
were  the  supplementary  STEM  scholarships  to 
support  students  in  the  regions  outside  Kaunas 
and  Vilnius(39),  and  additional  financing  allocated 
the  DeepTech  Entrepreneurship  master's 
to 
programme  at  Vilnius  University,  developed  in 
collaboration  with  the  European  Organization  for 
Nuclear  Research  (CERN)  (see  Annex  13).  The 
cohesion 
postdoctoral 
fellowships  and  research  trips  to  and  from 
Lithuania, attracts foreign researchers to carry out 
R&D  activities,  and  funds  mobility  initiatives  for 
Lithuanian researchers. There is both international 
and  intersectoral  mobility,  with  PhDs  in  business 
and postdoctoral internships in business. Lithuania 
is  attractive  to  potential  start-up  founders  due  to 
income  and 
the  quality  of 
regime, 
opportunities and future prospects, but scores low 
on quality of life (40).  

programme 

supports 

tax 

Lithuania  has  prioritised  entrepreneurship 
education  at  the  national  level.  Lithuania’s 
entrepreneurship  education  is  embedded  in  long-
term  national  development  planning,  notably 
through  the  ‘State  Progress  Strategy:  Lithuania’s 
Future  Vision  –  Lithuania  2050’.  The  strategy 
emphasises  entrepreneurship  as  a  key  driver  of 
innovation  and  economic  sustainability.  In  the 
school  curriculum,  entrepreneurship  education  is 
integrated  using  cross-curricular  and  subject-
based  approaches,  with  strong  emphasis  on 
financial  and  economic  literacy,  particularly  at 
upper  secondary  level.  Lithuania  is  an  active 
participant 
international 
programmes,  most  notably  Junior  Achievement, 
hands-on 
which 
entrepreneurial 
as  mini-
companies,  competitions  and  mentoring,  often  in 
cooperation with businesses. These initiatives play 
a major role in delivering practical entrepreneurial 
experience,  which  are  otherwise  more  commonly 
offered  as  extracurricular  activities  rather  than 
compulsory curriculum components. Lithuania also 
provides  guidance  encouraging  a  whole-school 

students  with 
such 

large-scale 

experience 

provide 

in 

(39)  Ministry of Economics and Innovation, 2025. 

(40)  OECD, What are the top OECD destinations for start-up 

(38)  The Lithuanian Startup Ecosystem 2025. 

talents? 2023. 

50 

 
 
 
Table A4.1: Key innovation indicators 

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

approach,  particularly  by  promoting  partnerships 
with businesses. 

51 

R&D intensity (gross domestic expenditure on R&D as % of GDP)0.791.041.121.061.041.04:2.243.44Public expenditure on R&D as % of GDP0.560.760.60.540.610.61:0.720.64Scientific publications of the country within the top 10% most-cited publications worldwide as % of total publications of the country 3.114.315.345.52:::9.4412.31Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population4.94.45.15.454.9:4.3:International co-publications as % of total number of publications27.4640.2449.4248.4950.2852.58:57.24:Business enterprise expenditure on R&D (BERD) as % of GDP0.230.290.530.530.430.43:1.492.70Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.110.220.470.410.31: :<0.47>0.30Researchers employed by business per thousand active population0.81.32.12.72.22.3:5.9:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)0.730.670.780.48:::2.812.20Employment share of high-growth enterprises measured in employment (%):::1.41.82::0.87:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::59.99:73.5171.39:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%)::::40.53:54.1139.85:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%)::::33.60:54.9046.69:Artificial intelligence adoption % enterprises (EU Digital Decade target by 2030: 75%)::::4.868.7621.3019.95:Public-private scientific co-publications as % of total number of publications5.534.945.615.085.85.37:7.62:Public expenditure on R&D financed by business enterprises (national) as % of GDP0.080.090.040.040.02::0.060.02Total public-sector support for BERD as % of GDP0.07:0.18:0.1::<0.21>:R&D tax incentives: foregone revenues as % of GDP0.020.020.040.050.04::<0.1>:BERD financed by the public sector (national and abroad) as % of GDP 0.05:0.140.120.06::<0.11>:Venture capital (market statistics) as % of GDP (calculated as a 3-year moving average)00.020.010.0700.0700.05:0.06:Seed stage funding share (% of GDP)00.010.010.010.010.01:0.01:Start-up stage funding share (% of GDP)00.010.010.020.030.02:0.03:Later stage funding share (as % of GDP)00.0100.040.030.03:0.03:New graduates in science & engineering per thousand population aged 25-34:18.3714.7411.8911.7::16.82:Graduates in the field of computing per thousand population aged 25-34:1.572.673.163.11::3.84:Science and innovative ecosystemsLithuania2010201520202022202320242025EU average (1)USHeadline indicatorInnovative talentR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesAcademia-business collaboration Public support for business innovationFinancing innovation 
 
 
 
  
 
ANNEX 5: SINGLE MARKET AND INDUSTRY 

to 

strengthen 

Lithuania  benefits  from  a  growth-conducive 
business environment and has demonstrated 
a  high  degree  of  resilience  in  navigating 
major  shocks  in  recent  years.  The  2025 
country-specific  recommendations  (CSRs)  called 
for  measures 
Lithuania’s 
competitiveness  by  removing  not  only  obstacles 
for  small  to  medium-sized  enterprises  (SMEs), 
such  as  skills  mismatches  and  labour  shortages, 
but  also  constraints 
finance, 
particularly  for  SMEs.  These  challenges  weigh 
more heavily on smaller firms, limiting their ability 
to scale up and fully benefit from investment and 
structural  change.  As  a  result,  and  despite  strong 
investment,  productivity  growth  has  stagnated  in 
sectors  which 
driven 
traditionally 
convergence,  including  manufacturing,  transport 
and logistics as well as professional services. 

in  access 

have 

to 

Business dynamics 

supported 

Lithuania  shows  comparably  high  levels  of 
investment,  which  are 
by 
ambitious  government  initiatives.  Since  the 
pandemic,  investment  measured  as  a  share  of 
GDP  has  increased  considerably.  With  22.4%  of 
total investment over GDP, Lithuania ranges above 
the EU aggregate of 21.7%. In particular, business 
investment  as  a  share  of  GDP  has  seen  a 
substantial  increase,  rising  from  12.4%  to  13.7% 
since 2020. This has been accompanied by strong 
GDP  growth  in  recent  years.  In  absolute  terms, 
(chain-linked 
gross 
volumes, 2015 prices) has increased by 30% since 
2020 (against 7% in the EU)(41). At the same time, 
however,  convergence  in  labour  productivity  has 
slowed down and stagnated at around 70% of the 
EU aggregate, with total factor productivity growth 
turning negative and capital-deepening stagnating 
at  comparably  low  growth  rates,  with  the  latter 
being driven by employment effects in the course 
of COVID19(42). 

formation 

capital 

fixed 

contribution 

recent  slowdown 

make-up  of  the  economy.  Between  2015  and 
in 
the 
2019  and  before 
productivity 
manufacturing, 
growth, 
wholesale/retail, and transport accounted for 21%, 
12%  and  13%  of  total  investment  growth(43), 
reflecting  their  role  as  the  main  drivers  of 
productivity and GDP growth. Since 2020, however, 
their 
fallen  markedly 
has 
(manufacturing to 6%, wholesale to 9%, transport 
to  7%),  which 
is  consistent  with  a  relative 
contraction  of  these  sectors  in  the  economy 
(measured  as  a  share  of  total  gross  value  added 
(GVA)(44).  At  same  time,  investment  growth  has 
become  concentrated 
in  the  capital-intensive 
energy  sector,  contributing  35%  to  investment 
growth  since  2020,  and  public  administration, 
including defence which contributed 9% to overall 
investment  growth  (9%)(45).  The  administration 
sectors  seem  to  generate  productivity  gains  only 
with long lags. Overall, these represent efforts on 
the  part  of  the  Lithuanian  government  and 
businesses 
independent, 
to  become  energy 
modernise  energy  systems  (see  annex  9)  and 
adapt to geopolitical circumstances(46). Investment 
conditions  include  the  green  corridor  for  strategic 
and  sustainable  projects,  the  investment  highway 
fast-track  mechanism, 
smart 
specialisation  strategy  guiding  public  investment 
and innovation support. 

and 

the 

to 
the  EIB 
firms  have 

The  recent  shift  in  investment  patterns 
reflects  firms’  efforts  to  adapt  to  emerging 
challenges  and  strengthen  their  resilience. 
Investment  Survey(47), 
According 
Lithuanian 
invested 
increasingly 
beyond pure replacement, with a higher share than 
the  EU  average  in  planning  capacity  expansion, 
supported  by  an  improvement  external  financing 
environment  and  high  internal  financing  capacity 
(46%  of  investment  funded  internally  in  2025[?]). 
Investment  dynamics  were  also  shaped  by  the 
resilience, 
need 
diversify 
accelerate 
sources 
digitalisation, with a rising share of firms adopting 
advanced 
tracking 
digital 

to  strengthen  supply-chain 

inventory 

import 

and 

and 

Investment patterns are increasingly shifting 
traditionally 
Lithuania’s 
away 
productivity-driving 
is 
accompanied  by  structural  changes  in  the 

sectors,  which 

from 

(43)  Eurostat. 

(44)  Ibid. 

(45)  Ibid. 

(41)  Eurostat. 

(46)  IMF, Article IV consultation Lithuania, 2025, authorities’ 

(42)  Ameco & The Evolving Growth Model of Lithuania: Republic 

of Lithuania. 

opinion. 

(47)  EIB Investment Survey, 2025. 

52 

 
 
 
 
 
 
technologies(48).  At  the  same  time,  sizeable 
investments  have  been  required  to  meet  climate-
related  demands,  with  Lithuanian  firms  leading 
the EU in adopting measures to reduce emissions 
and  adapt  to  physical  climate  risks,  pushing  up 
low-
investment  needs  even 
near-term 
productivity sectors(49). 

in 

Business  dynamism  indicators  point  to  very 
high  firm  turnover  in  Lithuania,  particularly 
among  small  and  young  firms.  In  industry, 
construction  and  services,  business  birth  rates 
reached  19.6%  in  2023,  almost  twice  the  EU 
average  of  10.5%,  while death  rates increased  to 
16.2%, against 8.5% in the EU(50). As a result, the 
overall churn rate amounted to 35.8% in Lithuania, 
substantially  above  the  EU  level  of  19.0%,  with 
especially elevated churn observed in construction, 
transportation, 
and 
administrative 
information  and  communication(51).  High  turnover 
is accompanied by markedly lower firm survival: in 
2023, only 69% of one-year-old firms and 53% of 
two-year-old  firms  in  Lithuanian  market  sectors 
remained  active,  compared  with  81%  and  67% 
respectively in the EU(52). Together, high entry and 
early  exit  rates  reduce  the  pool  of  firms  that 
persist beyond the initial years of activity, pointing 
to barriers to firm scale-up and limiting the extent 
investment  can  be  absorbed  by 
to  which 
expanding  firms  over  time.  Lithuania  has  sound 
insolvency 
the 
reallocation  of  resources  and  recovery  of  debt  in 
the case of market exits (OECD Economic Survey). 

frameworks,  which 

services 

support 

Business environment 

the 

past 

decade, 

Lithuania 

In 
has 
its 
successfully  taken  steps  to 
business  environment.  Following  a  series  of 
reforms,  Lithuania  ranked  first  among  OECD 
countries in the Product Market Regulation index in 
2023(53),  reflecting  an  open  and  competitive 
market.  Key  measures  taken  by  the  Lithuanian 

improve 

in 

the 

transparency 

government  include  simplifying  business  start-up 
procedures  through  a  single  online  entry  point(54), 
strengthening 
regulatory 
process,  and  improving  the  governance  of  state-
owned  enterprises  by  separating  ownership  and 
regulatory functions. A more competitive and less 
restrictive  market  environment  has  supported 
firms’ ability to adapt, innovate and use resources 
more  efficiently,  reinforcing  Lithuania’s  overall 
competitiveness (55).  This development is reflected 
in  a  comparatively 
low  share  of  companies 
reporting  labour  or  business  regulations  as  a 
major  obstacle  to  investment  (19%  vs  an  EU 
average  of  27%  and  19%  vs  34%)(56).  The  2025 
CSRs called for measures to strengthen Lithuania’s 
competitiveness  by  removing  not  only  obstacles 
for  SMEs,  such  as  skills  mismatches  and  labour 
shortages,  but  also  constraints 
in  access  to 
finance, particularly for SMEs.  

while 

firms 

smaller 

investment 

Several  barriers  continue  to  hinder  more 
productivity-enhancing 
and 
scaling  up,  particularly  for  SMEs.  Firms 
consistently  cite  uncertainty  about  the  economic 
outlook,  shortages  of  skilled  labour  (71%,  see 
Annex  11)  and  high  energy  costs  as  major 
obstacles, 
are 
disproportionately finance-constrained (19.8%, see 
Annex  6)  and  face  burdensome  business  and 
regulatory  requirements  across  EU  markets(57). 
Also,  when  it  comes  to  short-term  constraints, 
companies from the services and industrial sectors 
report  that  financial  constraints  pose  a  limiting 
factor to either production or business activities. In 
industry,  16.5%  of  firms,  compared  with  an  EU 
average  of  5.2%,  report  that  they  could  produce 
more  if  they  were  not  financially  constrained. 
25.4% of companies from the service sector report 
that  financial  constraints 
limit  their  business 
activities  (vs  an  EU  average  of  11.1%).  These 
frictions  limit  the  ability  of  SMEs  to  shift  from 
maintenance and compliance-driven investment to 
innovation-oriented  projects  that  would  more 
effectively  raise Lithuania’s  productivity  trajectory 
(see Annex 4)(58). 

(48)  EIB Investment Survey, 2025. 

(49)  Ibid. 

(50)  Eurostat. 

(51)  Ibid. 

(52)  Ibid. 

(54)  One of the 'Terrible Ten' in the Single Market strategy, 

COM(2025) 500, 21.5.2025. 

(55)  National Productivity Board, 2025. 

(56)  EIB Investment Survey, 2025. 

(57)  Ibid. 

(53)  OECD PMR, 2024. 

(58)  IMF, Article IV consultation Lithuania, 2025. 

53 

 
 
 
These  barriers  weigh  on  SMEs’  business 
prospects, especially micro firms, while SMEs 
play a central role in Lithuania’s economy. In 
2024,  SMEs  represented  99.8%  of  enterprises, 
employed  71.8%  of  the  workforce  and  generated 
62.6%  of  total  value  added  in  the  non-financial 
business sector, with micro firms alone accounting 
for  95%  of  all  enterprises  but less than  one  fifth 
of value added(59). SME performance weakened in 
2024,  with  employment  broadly  stagnating  (–
0.1%)  and  real  value  added  declining  (–0.4%), 
although  outcomes  remained  significantly  better 
than  in  2023.  Developments  varied  across  firm 
sizes,  with  declines  concentrated  among  micro 
firms,  while  the  rest  of  the  SMEs  continued  to 
make modest  expansions in  employment.  Looking 
ahead,  SMEs  are  expected  to  recover  in  2025, 
driven 
in 
information  and  communication,  where  SME 
employment and real value added are forecast to 
respectively, 
increase  by  7.5%  and  10.3% 
for 
underscoring 
the 
Lithuania’s  growth  dynamics  despite 
their 
heterogeneous  performance  across  sectors  and 
size classes. 

in  particular  by  strong  growth 

importance  of  SMEs 

limited.  While 

constrained  by  difficulties 

Investment  and  business  activity  of  SMEs 
in 
remain 
accessing  external  finance.  Progress  on  the 
CSR  relating  to  improving  access  to  finance  for 
SMEs  has  been 
the  overall 
macroeconomic  situation  is  improving  (decreasing 
interest  rates),  and  financing  conditions  have 
eased  slightly(60),  Lithuanian  SMEs  continued  to 
have  difficulties  in  accessing  external  finance  in 
2025 (see Annex 6). The share of firms citing the 
availability  of  finance  as  an 
impediment  to 
investment, decreased from 52% in 2024 to 42% 
in 2025. Nevertheless, this development has been 
driven by an improvement for medium/large firms 
(according  to  the  EIB  Investment  Survey.  By 
contrast,  the  situation  for  micro/small  enterprises 
worsened,  with  54%  of  firms  naming  access  to 
finance as an obstacle to investment. The situation 
mainly 
the  service  sector.  For 
manufacturing  and  infrastructure  companies  the 
situation  remained  challenging,  while  it  worsened 
drastically for firms in the construction sector(61). 

improved 

in 

in  business-to-business 

The 
late  payment  situation  has  been 
improving  but  delayed  payments  remain 
prevalent 
(B2B) 
transactions. In 2024, 55% of firms in Lithuania 
reported  experiencing  problems  related  to  late 
payments,  according  to  the  ECB/EC  SAFE  survey, 
down from 59% in 2023(62). While the incidence of 
late  payments  remained  above  the  EU  average 
(52%),  the  gap  narrowed  substantially  compared 
with  the  previous  year,  as  the  share  of  firms 
affected declined in Lithuania but increased at EU 
level  between  2023  and  2024(63).  Additionally, 
companies  are  experiencing  delayed  payment 
mainly  in  B2B  activities.  According  to  the  SAFE 
survey,  60%  of  companies  report  that  they 
experience  late  payments  from  private  entities 
either regularly (15%) or occasionally (45%), while 
only  13%  report  it  in  business-to-government 
(B2G) transactions (5% regularly, 8% occasionally). 

Although mobile  connectivity performance is 
very  strong,  fixed  network  deployment 
remains  uneven,  particularly  in  rural  areas. 
Lithuania reached 78.29% fixed very high-capacity 
network  (VHCN)  coverage  in  2024,  below  the  EU 
average of 82.49%, with a low annual growth rate 
of  0.3%  compared  with  4.9%  at  EU  level.  In 
sparsely  populated  areas,  coverage  stood  at 
39.78%,  significantly  below  the  EU  average  of 
61.89%,  and  rural  growth  remained  limited  at 
+0.5%.  Fibre-to-the-premises 
(FTTP)  coverage 
reached 78.29% in 2024, above the EU average of 
69.24%.  In  rural  areas,  FTTP  coverage  stood  at 
39.78%,  below  the  EU  average  of  58.78%, 
highlighting persistent territorial gaps. By contrast, 
overall  5G  coverage  reached  99.71%  in  2024, 
above  the  EU  average  of  94.35%.  Rural  5G 
coverage was also high at 99.06%, well above the 
EU  average  of  79.57%.  Coverage  in  the  3.4-3.8 
GHz band reached 75.13%, above the EU average 
of  67.72%.  However,  harmonised  5G  spectrum 
assignment  remains  below  EU  levels  at  47.22%, 
compared  with  74.63%  in  the  EU  in  2025.  Two 
major  publicly  funded  projects,  supported  by  the 
Recovery and Resilience Facility and the European 
Regional  Development  Fund,  aim  to  extend  fibre 
and telecom infrastructure in underserved areas. 

(59)  European Commission, SME Performance Review 2025. 

(60)  Bank of Lithuania, lending survey, 2025. 

(62)  SAFE 

(61)  EIB Investment Survey, 2025. 

(63)  EU payment observatory, annual report, 2025. 

54 

 
 
 
Single Market 

to 

fragmented 

Lithuania  is  well  integrated  into  the  Single 
Market, with trade integration accounting for 
up  to  half  of  its  GDP,  but  businesses  are 
subject 
regulatory 
the  EU.  Regarding 
environments  across 
services and goods, the Lithuanian economy relies 
more than other EU Member States' economies on 
trade  within  the  Single  Market.  With  a  trade 
integration  of  17%  for  services  and  34%  for 
goods(64), Lithuania is  comparably  well  embedded 
into  European  supply  chains(65).  Nevertheless, 
companies  are  being  held  back  by  regulatory 
ineffective 
fragmentation  within  the  EU  and 
mutual  recognition.  96%  of  businesses  in  the 
manufacturing  sector  and  93%  in  the  services 
sector  report  that  their  main  product  or  service 
regulatory 
must  comply  with  differentiated 
requirements,  standards  or  consumer  protection 
rules  across  EU  Member  States(66).  Lithuania’s 
deep  integration  into  the  Single  Market  has 
supported  the  resilience  of  its  supply  chains 
amid  trade  disruptions  and  heightened 
geopolitical  uncertainty.  Import  dependencies 
are  predominantly  concentrated  within  the  EU, 
ensuring  access  to  diversified  and  stable  supply 
networks,  while  exposure  to  higher-risk  trading 
partners has declined markedly  since 2012-2014. 
The  episode  of  economic  coercion  by  China  in 
2021-2022  had  only 
limited  and  short-lived 
effects  on  Lithuania’s  overall  exports,  as  firms 
were  able  to  redirect  trade  towards  alternative 
markets, supported by the openness and depth of 
the Single Market(67). 

Lithuania  has  been  actively  reforming  its 
public  procurement  system,  but  single  bids 
remain  elevated.  In  2025,  40%  of  procurement 
contracts  were  awarded  following  a  single  bid, 
exceeding  the  EU  median  of  27%,  while  6%  of 
contracts  were  awarded  without  a  public  tender, 
corresponding to the EU median. To address these 
challenges,  Lithuania  has  rolled  out  a  range  of 
measures  aimed  at  enhancing  competition  and 

the 

With 

is  seeking 

broadening  supplier  participation,  particularly 
among  SMEs,  which  accounted  for  81-84%  of 
awarded  public  procurement  contracts  between 
2021  and  2023(68).  Lithuania’s  reform  efforts 
focus  strongly  on  the  areas  of  centralisation  and 
ongoing 
professionalisation. 
centralisation of procurement through the national 
Central  Purchasing  Body  (CPO  LT)  e-catalogue, 
Lithuania 
reduce  single  bids 
to 
significantly  in  the  future.  According  to  national 
data, 
increasing  shares  of  centrally  awarded 
contracts  leads  to  a  reduction  in  the  share  of 
single  bids(69).  By  2025  35.9%  of  contracts  were 
awarded  centrally  in  terms  of  their  numbers  (up 
from 2.8% in 2021) and 50.4% of contracts were 
awarded centrally in terms of their value (up from 
11.7%).  Another key element of the reform is the 
ongoing  effort  to  professionalise  public  procurers. 
Here,  Lithuania  introduced  a  national  certification 
framework,  expanded 
resources  and 
launched  a  dedicated  master’s  programme  in 
public  procurement  to  further  professionalise 
procurement  practices.  Moreover,  a  plan 
is 
underway  to  engage  more  suppliers,  particularly 
education 
SMEs, 
programmes  and  standardised  contract  terms. 
Additionally, the proportion of procedures awarded 
solely  because  the  offer  was  the  cheapest  one 
available  has  been  consistently  decreasing  from 
88%  in  2021,  down  to  73%  in  2024.  This  was 
supported  by 
recovery  and 
the  Lithuanian 
resilience plan. 

regional 

through 

training 

events, 

Businesses’  views  on  corruption  risks  in 
public  procurement  are  above  the  EU 
average.  In  Lithuania,  59%  of  companies  (EU 
average: 58%)  consider tailor-made specifications 
for  particular  companies  in  public  procurement 
procedures, and 52% (EU average: 51%) collusive 
bidding  to  be  a  ‘very’  or  ‘fairly  widespread’ 
practice.  49%  of businesses perceive  the  level  of 
independence  of  the  public  procurement  review 
bodies (district courts) as very or fairly good when 
it is reviewing public procurement cases.(70) Public 
procurement is  a  high-risk  area  of  corruption  in 
Lithuania.(71) The National Audit Office carries out 
regular assessments of corruption risks in various 

(64)  Measured as the average of imports and exports as a share 

(68)  Member State reporting. 

of GDP. 

(65)  Eurostat. 

(69)  Centralizacijos pažangos stebėsena. 

(70)  Justice Scoreboard (2025), p. 53; Flash Eurobarometer 555, 

(66)  EIB Investment Survey, 2025. 

p. 39.  

(67)  Lithuania’s trade dependencies | OECD 

(71)  Rule of Law Report- Country Chapter Lithuania (2025), p. 10. 

55 

 
 
 
sectors.(72) In 2024, a project was launched aiming 
at  identification  of  corruption  risks  based  on 
artificial intelligence in cases of use of public and 
EU  funds.(73)  In  2024,  the  Procurement  Office 
established  a 
for 
department 
procurement  governance  and  presented  analytical 
findings revealing the reasons for the persistently 
high single supplier indicator(74). 

responsible 

for 

and 

firms 

cross-border  procurement, 

landscape  and 
Lithuania’s  e-procurement 
data  quality  issues  highlight  the  need  for 
interoperable  systems,  common  standards 
and  stronger  data  governance. Lithuania’s 
centralised e-procurement service allows economic 
operators  to  use  a  single  system  to  access  all 
national  public  procurement  procedures.  However, 
issues 
concerning 
remain  which  create complexity  and barriers  to 
participation 
from  other  Member 
States. This  fragmentation  underscores  the  need 
common 
for introducing interoperability 
standards. The  once-only  principle 
is  not  yet 
implemented  at  national  level  (see  Annex  7),  and 
buyers  across  the  EU  still  lack  digital  access  to 
relevant  evidence.  Additionally,  Lithuania  has  a 
data  strategy 
the  processes 
that  sets  out 
and objectives in  terms  of  managing  and  utilising 
data  related  to  their  procurement  processes. 
Additionally, Lithuania has publicly available public 
procurement  dashboard  which  shows  every 
contracting  authority  and  its  score  based  on  19 
different  indicators.(75)  [LT  comment]  Moreover, 
Lithuania  has  a  dedicated  entity  in  charge  of 
monitoring  and  accessing  the  uptake  of  public 
procurement  at  the  national  level,  the  public 
Therefore, 
procurement 
the Lithuanian system benefits from a  dedicated 
public  procurement  data  collection  and  analysis 
service within  the  government to  support  data-
driven oversight of the procurement lifecycle(76). 

office. 

(72)  Ibid. 

(73)  Rule of Law Report- Country Chapter Lithuania (2025), 

pp. 10-11. 

(74)  Rule of Law Report- Country Chapter Lithuania (2025), p. 11. 

(75) https://vpt.lrv.lt/lt/statistika-ir-analize/pirkimu-

vykdytoju-zemelapis-svieslente-1/. 

(76)  European Court of Auditors, Special Report 28/2023: Public 
Procurement in the EU. Less competition for contracts 
awarded for works, goods and services in the 10 years up to 
2021, 2023,  

56 

for 

resources 

Additional 
Lithuania’s 
standardisation system could improve access 
to  the  Single  Market.  To  this  end,  Lithuania 
should provide additional support to the Lithuanian 
Accreditation and Standartization agencyto ensure 
it can undertake the necessary transition toward a 
digitalised  standardisation  process,  allowing  for 
faster,  more  efficient  and  more 
inclusive 
standardisation.  Moreover,  additional  resources 
could  be  directed  toward  ensuring  Lithuanian 
experts can effectively participate in the European 
Standardisation  System,  notably  in  new  critical 
sectors such as AI and quantum. 

Lithuania  is  among  the  best  performers  in 
complying  with  Single  Market  legislation.  As 
of 2025, only 0.6% of all Single Market directives 
have  not  been  fully  transposed  into  national  law, 
well  below  both  the  EU  average  of  1.1%  and  the 
1%  target  set  by  the  EU  Council.  Only  0.3%  of 
transposed directives are not transposed correctly 
(EU  average:  1.1%).  This  is  also  reflected  in  a 
comparably  low  number  of  pending  infringement 
proceedings  against  Lithuania  (10  vs  the  EU 
average of 25). However, the average duration of 
infringement  proceedings  requires  attention.  This 
has increased, from 46.8 months in 2024 to 57.8 
months  in  2025,  above  the  EU  average  of  44.5 
months(77).  Moreover, 
the  Lithuanian  SOLVIT 
centre  has  resolved  100%  of  cases  handled  as 
lead centre in the past year (EU average: 84.6%).  

Compliance  of  products circulating  in  the 
Single  Market(78)  is  key  to  ensuring  a  level-
playing  field  for  law-abiding  companies  and 
the 
the  safety  of  consumers. In Lithuania, 
number  of  market  surveillance  investigations  has 
increased  compared  with  2019.  In  2025,  national 
authorities  reported  in  the  EU  system  for  market 
total 
surveillance 
of 548.3 investigations per one million inhabitants, 
which is higher than the EU median of 136.2. The 
number 
in 
absolute  terms,  which  may  also  be  the  result  of 
insufficient  IT  national  interoperability  to  the 
ICSMS  system.  The  upcoming  revision  of  the 

notifications remains limited 

(ICSMS) 

of 

a 

(77)  Single Market Scoreboard, 2025. 

(78)  Part of the barriers highlighted in the Single market 

strategy (‘Terrible Ten’) and the 2026 Annual Single Market 
and Competitiveness Report. 

 
 
 
 
Market Surveillance Regulation will upgrade ICSMS 
to a fully interoperable EU digital platform.  

and has played a stabilising role, partly offsetting 
weaker performance in more traditional sectors. 

Industry and economic security 

increasingly 

Lithuania’s 
industrial  sector  remains  an 
important  part  of  the  economy  within  a 
service-oriented  structure.  Industry,  excluding 
construction,  represents  about  19%  of  GVA. 
Manufacturing  continues to  play  a  key  role  in the 
industrial sector and drives exports, with producers 
of  chemical  products,  optical  instruments  and 
computers  becoming 
important. 
Lithuania’s  economy  is  highly  open  and  export-
oriented in both goods and services, and its share 
in global exports has increased by more than 50% 
since  2006(79).  Although  the  overall  size  of  high-
limited, 
technology  manufacturing 
Lithuania holds a strong position in selected niche 
areas,  notably  specialised 
laser  technologies, 
pointing to an ongoing shift of the industrial base 
technological 
towards  activities  with  higher 
content.  Within  services,  the  wholesale  and  retail 
trade  and  transport  remain  the  largest  sectors, 
while information and communication has become 
fastest-growing  activities,  now 
one  of 
accounting 
to  5%  of  GVA  and 
increasingly  linked  to  global  value  chains.  In 
parallel,  a  growing 
fintech  ecosystem  has 
supported the expansion of financial services since 
the  pandemic,  yet  the  sector  remains  relatively 
small. 

for  close 

remains 

the 

The  information  and  communication  (ICT) 
sector has become an increasingly important 
pillar  of  Lithuania’s  growth  model  over  the 
past decade. The sector expanded at an average 
annual  rate  of  around  10%  in  GVA,  driven  by 
increases in labour inputs, foreign investment and 
targeted policy support, including tax incentives for 
start-ups  and  strategic  frameworks  such  as  the 
smart  specialisation  strategy  and  the  fintech 
strategy(80).  As  a  result,  the  share  of  ICT  in  the 
economy  increased  from  around  3%  of  GVA  in 
2015 to over 5% by 2024, while its contribution to 
employment  rose  steadily(81).  In  recent  years,  ICT 
has  been  the  fastest-growing  economic  activity 

to 

The  structure  of  the  ICT  sector  has  shifted 
towards  higher  value  added  and  more 
export-oriented  activities,  strengthening  its 
contribution 
resilience  and  external 
performance.  Telecommunications,  previously 
dominant  and  largely  domestically  oriented,  have 
been  overtaken  by  rapidly  growing 
IT,  data 
processing,  software  and  digital  services  firms, 
with  exports  accounting  for  more  than  half  of 
sectoral  revenue  by  2024(82).  However,  despite 
rapid  growth 
in  output  and  employment, 
productivity  gains  in  the  sector  have  so  far  been 
limited,  reflecting the  early  stage  of  development 
of  many  firms  and  ongoing  market  selection. 
Looking  ahead,  the  ICT  sector  is  expected  to 
remain 
and 
driver 
competitiveness,  provided  that  constraints  related 
to  firm  scaling,  skills  availability  and  productivity 
enhancement are effectively addressed(83). 

growth 

key 

of 

a 

Graph A5.1: Manufacturing industry production: total and 
selected sector, index (2021=100), 2015-2024 

Source: Eurostat 

prices 

elevated, 

While  electrification  rates  remain  low  and 
electricity 
Lithuania’s 
energy-intensive 
industries  have  partly 
recovered  from  recent  shocks.  With  16.5% 
Lithuania’s  electrification  rate  in  industry  is  well 
below  the  EU  average  of  22.92%(84).  Electricity 

(79)  Ameco. 

(82)  National Productivity Board, 2025. 

(80)  IMF, Article IV consultation Lithuania, 2025. 

(83)  IMF, Article IV consultation Lithuania, 2025. 

(81)  Eurostat. 

(84)  Eurostat. 

57 

4555657585951051151251351452015201620172018201920202021202220232024ManufacturingManufacture of wood and of products of wood and cork, except furniture; manufacture ofarticles of straw and plaiting materialsManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of rubber and plastic productsManufacture of other non-metallic mineral productsManufacture of basic metals 
 
       
 
prices  have  recovered  since  the  beginning  of 
Russia’s  full-scale  invasion  of  Ukraine  but  remain 
substantially  higher  in  Lithuania  than  in  other 
regions  of  Europe.  The  energy-price  shock  has 
initially  taken  a  substantial  toll  on  production 
volumes in Lithuania’s energy-intensive industries, 
but  due  to  the  government’s  strong  efforts  to 
diversify energy imports and pursue an ambitious 
green  agenda,  prices  have  stabilised  at  a  high 
level.  Amidst  recent  recovery  on  domestic  and 
export  markets,  production  volumes  have  picked 
up again. Nevertheless, they have still not reached 
pre-2023 levels. (See also Annex 9.) 

Lithuania has made progress in implementing 
the  Net-Zero  Industry  Act  (NZIA).  It  has 
successfully  designated a  single  point  of  contact, 
which  is  crucial  for  streamlining  communication 
and 
stakeholders. 
Furthermore,  Lithuania  has established a  national 
process 
contact 
applications, facilitating the  advancement  of  net-
zero  strategic  projects,  despite  having  no 
confirmed projects yet. 

coordination 

among 

point 

to 

58 

 
Table A5.1: Single Market and Industry 

Source: (1) Eurostat, (2) EIB Investment Survey, (3) EIF SME Access to Finance Index, (4) Intrum Payment Report, (5) SAFE survey, 
(6) OECD, (7) data up to 2024: Single Market and Competitiveness Scoreboard, 2025: Commission calculation based on TED data, 
accessible at the Public Procurement Data Space (PPDS) (*) the value represented here under EU average is the median, (8) Single 
Market and Competitiveness Scoreboard, (9) European Commission calculations. 

59 

POLICY AREA20212022202320242025EU-27 average73.370.770.070.270.6100.014.714.215.013.7-12.63.23.24.24.2-3.9Business environment and simplification22.420.313.521.919.034.00.340.420.270.37-0.430.420.140.120.10-0.1911.912.313.4--17.410.617.318.7--13.6from private entities in the previous or current quarter---52.259.947.1from public entities in the previous or current quarter---15.313.415.951.258.251.650.151.040.70.0390.0390.0380.0380.0380.0503034374440276765661.70.30.30.30.61110.70.40.31.1100-10010010084.61615151210250.17430.3065---0.146230.532.432.3--32.728.229.631.935.4-25.237.936.834.733.4-22.44.14.04.14.2-12.2LithuaniaINDICATOR NAMEBusiness environment and investmentProductivity and investmentLabour productivity (GDP per hour worked in PPP terms), % of EU271Business investment (share of GDP)1Public investment (share of GDP)1Impact of regulation on long-term investment, % of firms reporting business regulation as a major obstacle2SME liquidityEIF Access to Finance for SMEs index - loans3EIF Access to Finance for SMEs index - equity3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment4Payment gap - public sector, difference in days between offered and actual payment4Share of SMEs experiencing late payments, %5Industry and economic securitySingle Market IntegrationEU trade integration, average(intra-EU imports + intra EU exports)/GDP, %1EEA Services Trade Restrictiveness index6Public procurementSingle bids, % of total contractors7*Direct awards, % of negotiated procedures7*ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, resolution rate per country, %8Number of pending infringement proceedings8Energy-intensive industriesElectricity prices for non-household consumers1Electrification (electricity as a share of total energy consumption in industry)1Share of energy from renewable sources (renewable energy generation as a share of overall energy consumption)1Critical raw materialsMaterial import dependency, %1Circular material use rate1Operational cleantech manufacturing capacity in 20259 - Solar PV (c: cell, w: wafer, M:module), GW0.345 (m) - Electrolyzer, GW- - Heat pump assembly - - Battery, GW- 
 
 
 
 
     
 
ANNEX 6: SAVINGS, INVESTMENT AND ACCESS TO FINANCE 

Table A6.1: Savings and Investments Union summary diagnostic 

Source:  OECD (pensions), Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital 
taxation). End-2024. 

funding 

Companies  in  Lithuania  rely  less  than  the  EU 
average  on 
from  banks  and  only 
marginally  on  capital  markets.  They  rely  more  on 
internal  funding  to  fund  their  investments  than 
their  EU  peers. The  ratio  of  bank  loans  to  GDP  is 
among  the  lowest  in  the  euro  area.  The  domestic 
listed  equity  market  remains  modest  from  a 
European perspective, while debt markets channel 
savings  mostly  to  the  government,  despite  the 
recent  positive  trend  in  the  corporate  segment. 
Households  still  have  ample  space  to  increase 
their  level  of  direct  and  indirect  participation  in 
capital  markets,  and  one  issue  highlighted  in  the 
2025  CSRs  for  Lithuania  was  the  importance  of 
savings for investment (85). The Lithuanian banking 
sector  remains  robust  with  most  performance 
indicators  ranking  among  the  best  across  the  EU. 
loan  portfolios  have  shown 
While  corporate 
growth,  businesses  have  faced  challenges 
in 
accessing  finance  due  to  high  risk  aversion  from 
banks  and  structural  factors.  Non-bank  financial 
intermediaries  –  which  have  both  the  funds  and 
the  capacity  to  drive  capital  market  progress  – 
allocate assets very conservatively, which does not 
favour  equity.  The  reform  of  the  supplementary 
pension  system 
contribute 
negatively both to the size of the sector and to its 
role  in  funding  the  economy.  The  venture  capital 
ecosystem  remains  quite  small  and  is  dominated 
by public funds channelled primarily by the various 
national development institutions. 

is  expected 

to 

(85)  ‘Improve access to finance for small and medium-sized 

enterprises including by stimulating competition in financial 
services and participation in financial markets by facilitating 
the use of savings for investment.’ 

60 

Business landscape and company 
funding 

the  EU  average, 

Compared  with 
the 
Lithuanian  business  landscape,  in  terms  of 
structure  and  size,  relies  less  on  large 
companies. In Lithuania micro, small and medium 
companies play a stronger role in the structure of 
the  economy,  at  the  expense  of  large  companies 
(see  Annex  5  for  more  details).  This  has 
implications for the corporate sector’s demand for 
funding, which are discussed in this annex.  

funding,  as 

Companies in Lithuania rely less than the EU 
average  on  funding  from  banks,  and  even 
less  so  from  capital  markets.  Compared  with 
their  EU  peers,  non-financial  corporates  (NFCs)  in 
Lithuania  use 
it 
less  external 
represents only 121% of GDP, vs 226% for the EU 
(see  Graph  A6.1).  Lithuanian  NFCs  rely  less  on 
loans and even less on stock and bond issuance or 
other  alternative  sources  than  their  EU  peers.  At 
the end of 2024, finance through loans constituted 
23% of all funding for Lithuanian NFCs (86), while 
listed shares and bonds represented only 3.6% of 
funding. The equivalent figures for the EU average 
were 27% and 19%. The market funding ratio (87) 
as  of  end  2024  was  only  28.9%,  compared  with 

(86)  While  financing  from  banks  through  loans  in  Lithuania 
accounted for 15.4% of GDP at the end of 2024, the broader 
financial sector (including banks' subsidiary leasing and other 
financial companies) accounted for 28% of GDP. 

(87)  I.e. the volume of corporate bonds and listed shares of NFCs 
relative to the volume of those two and bank loans to NFCs. 

Main featuresRelative EU positioningAssets at 12.2% of GDP (32.3% in the EU)10-year real return of 0.5% (1.4% in the EU)The low pension assets yield a low real return.EUR 22,821 per capita (EUR 85,098 in the EU)o/w 3.5% in listed shares and bonds (7.6% in the EU)o/w 2.7% in investment funds (11.0% in the EU)o/w 1.7% in life insurance (13.4% in the EU)o/w 14.4% in  pension claims (13.6% in the EU)A very low share of households' low financial assets is invested in equity and in capital markets.VC at 0.057% of GDP (0.064% in the EU)PE at 0.286% of GDP (0.487% in the EU)Medium venture capital and medium private equity investments.Flat rate of 15% is applied to most assets and savings types ; exemptions apply; favourable treatment for private pensions (3rd pillar)N/A1-34-1011-1718-2425-27Data sources: OECD (pensions), Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital taxation).Colours indicate the country's relative ranking based on five groups, ranging from the three best to the three worst performers. The relative ranking as regards an SIU diagnostic topic derives from a consistent cross-country comparison, the starting point of which is the average of the underlying main features.TopicAssets-backed pension schemesHouseholds' financial assetsVenture capital (VC)Private equity (PE)Capital taxation 
 
 
 
 
 
  
 
  
 
Graph A6.1: Composition of non-financial corporates' funding 

an  EU  average  of  49.7%.  Conversely,  unlisted 
shares  (88)  represent  by  far  the  largest  source  of 
external financing for local businesses: 53% of the 
total  vs  24.5%  for  the  EU  as  of  end-2024. 
Companies  prefer  to  rely  on  private  equity  over 
public  listings,  given  the  overall  shallow  capital 
markets. This also relates to the structure of local 
businesses,  which  are  often  SMEs  or  closely  held 
companies.  

they 

larger 

require 

Several  lines  of  action  have  been  taken  to 
strengthen  capital  markets  through  public–
private collaboration, building on cooperation 
among  the  Baltic  national  development 
banks.  SMEs  find  it  difficult  to  access  and  take 
advantage of Lithuanian capital markets, as there 
in 
are  no  established  SME  growth  markets 
Lithuania,  nor 
In 
in  the  other  Baltic  states. 
response, Lithuania’s development bank, ILTE, and 
Latvia’s  development  finance  institution,  Altum, 
previously set up a fund for initial public offerings 
(IPOs)  to  prepare  businesses  for  listing.  Once 
companies reach the stage that they have already 
proven  their  business  model  and  start  expanding 
long-term 
internationally, 
equity  capital  to  continue  scaling,  while  local 
equity  funding  options 
limited,  and 
traditional  banks  are  often  reluctant  to  lend  to 
innovation-driven  or  export-oriented  companies 
without  hard  collateral.  To  ensure  a  more  robust 
continuum  of  financing  options,  bridging  critical 
financing  gaps  at  the  scale-up  and  growth  stage, 
the  two  national  promotional  institutions  –  Altum 
and  ILTE  –  approved  the  Baltic  Capital  Market 
Acceleration  Fund  in  2023.  The  fund,  worth  over 
EUR 50 million,  began  its  operations  in  October 
2025  and  will  remain  active  for  the  next  decade. 
By  investing  through  new  share  and  bond  issues 
over  10  years,  it  is  expected  to  boost  equity  and 
listings  on  Nasdaq  Baltic  exchanges, 
bond 
enhancing  market  liquidity  and  access  to  growth 
capital  across  the  region.  Moreover,  ILTE  offers 
individual  guarantees  for  bond  issues  of  private 
and  public  companies,  helping  issuers  to  access 
capital markets with greater investor confidence.  

remain 

Source: Eurostat. End-2024. 

Surveys  suggest  there  is  a  financing  gap 
relative to investment demand, especially for 
SMEs.  According  to  the  2025  EIB  Investment 
Survey,  only  half of all Lithuanian  companies rely 
on bank finance to invest, the lowest proportion in 
the  EU  (with  the  EU  average  at  79%).  Moreover, 
the  country  has  a  relatively  high  share  of  firms 
that  consider  themselves  as  finance-constrained 
(10.4%),  although  this  share  declined  compared 
with  2024.  As  a  result,  they  rely  more  heavily  on 
internal funding. In the 2025 SAFE survey, 51% of 
SMEs  indicated  that  internal  funding  (retained 
earnings  or  sale  of  assets)  was  relevant  to  their 
business,  compared  with  an  EU  average  of  28% 
(89).  At  the  same  time,  18%  of  all  Lithuanian 
companies believed that their investment activities 
over the  last  three years were  not  sufficient.  This 
is – together with the other two Baltic countries – 
one  of  the  highest  levels  of  underinvestment  in 
the EU (EU average of 12%), suggesting that there 
may  be  a  financing  gap  relative  to  investment 
demand, especially for SMEs. The 2025 CSR 3 for 
Lithuania highlighted the importance of improving 
access  to  finance  for  small  and  medium-sized 
enterprises (90).   

(88)  Unlisted  shares  in  Lithuania,  also  known  as  private  limited 
company  shares  or  public  limited  company  shares  that  are 
not traded on a stock exchange, can be bought and sold, but 
transactions 
traditional  exchanges.  These 
not 
typically  occur  through  over-the-counter  markets  or  private 
placements, often facilitated by intermediaries or investment 
platforms. 

through 

(89)  Data  and  surveys  -  SAFE  -  European  Commission,  2025, 

Results by country, T20. 

(90) ’Improve  access  to  finance  for  small  and  medium-sized 
enterprises  including  by  stimulating  competition  in  financial 
services and participation in financial markets by facilitating 
the use of savings for investment.’ 

61 

050100150200250LTEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
 
     
 
Size and structure of the financial 
sector 

Lithuania’s monetary financial sector is very 
small  compared  with  the  EU  average,  and 
concentration  is  high.  At  the  end  of  Q3-2025, 
total  bank  assets  were  equivalent  to  Lithuania’s 
GDP,  significantly  below  the  EU  average  of 
246.1%.  Nevertheless,  banks  and  other  monetary 
financial institutions (MFIs) continue to account for 
the largest share (76%) of the Lithuanian financial 
market. Foreign presence is high and accounts for 
about  three  quarters  of  assets.  With  the  top  five 
MFIs  representing  more  than  90%  of  the  sector, 
banking  concentration  appears  to  be  significantly 
higher  than  the  EU  average  of  51%.  The  total 
assets of pension funds were equivalent to 12.2% 
of  GDP  at  the  end  of  2024,  vs  an  EU  average  of 
32.3%  at  the  end  of  Q3-2025.  The  rate  of  public 
pension spending as a percentage of GDP (6.2%) is 
currently  one  of  the  lowest  in  the  EU.  The 
Lithuanian  insurance  sector  is  even  smaller,  with 
total  assets  representing  2.5%  of  GDP  as  of  end 
Q3-2025 (vs 53.9% for the EU on average). 

Lithuanian  capital markets  remain relatively 
shallow, inactive and illiquid, despite efforts by 
authorities  from  Lithuania,  Estonia  and  Latvia  to 
develop  and  further  integrate  capital  markets  in 
the Baltic region. The three Baltic states have been 
working  towards  integrating  their  capital markets’ 
infrastructure and in 2017 signed a Memorandum 
of  Understanding  to  ‘cooperate  in  developing  a 
deeper and more efficient regional capital market’. 
This  commitment  was  followed  by  efforts  to 
harmonise  regulation  between  them  and  create 
pan-Baltic  products.  The  three  national  central 
securities depositories (CSDs) were also merged in 
2017, resulting in the creation of Nasdaq CSD SE, 
legally  based  in  Latvia.  Despite  these  efforts,  at 
the  end  of  Q3-2025,  the  market  capitalisation  of 
Nasdaq  Vilnius  Stock  Exchange  (91)  was  just 
around  6.2%  of  GDP  (compared  with  30%  before 
the  2009  crisis).  This  is  extremely  low  compared 
with  other  EU  countries (EU  average  of  69.9%  as 
of end Q3-2025). The prospects for capital market 
development  are  limited  by  the  low  number  of 

(91)  The  Nasdaq  Vilnius  Stock  Exchange  belongs  to  the  Nasdaq 
group, which in the EU operates other trading venues in the 
two  other  Baltic  states  of  Estonia  and  Latvia,  as  well  as  in 
Sweden, Finland and Denmark. 

62 

them 

less  attractive 

listed enterprises (25 as of Q4-2025). This results 
in few local investment opportunities, low interest 
from  institutional  and  retail  investors,  and  thus 
limited  opportunities  to  raise  capital  locally.  The 
lack of depth and liquidity of Lithuanian securities’ 
to 
markets  makes 
international investors and is also reflected in the 
identification  of  Lithuania  by  the  2025  MSCI 
Market  Classification  Review  as  an  ‘advanced 
frontier  market’,  a  new  subcategory  added  by 
MSCI 
that 
demonstrate  market  accessibility  characteristics 
closely  aligned  with  those  of  developed  markets 
but  remain  classified  as  frontier  markets  due  to 
their size and liquidity constraints. Debt markets in 
Lithuania  remain  significantly  underdeveloped  as 
well  and  dominated  by  government  securities. 
However,  the  corporate  segment  has  experienced 
recently a positive trend. The liquidity of securities 
traded on Nasdaq Vilnius is limited.  

‘frontier  markets’ 

identify 

to 

Graph A6.2: Capital markets and financial intermediaries 

Source: ECB, EIOPA, AMECO. End-2024. 

Guidelines 

In November 2022, the government approved 
Capital  Market 
for 
the 
Development  2023-2025  to  help  the  capital 
markets  to  grow.  The  aim  was  to  promote  the 
stable  and  competitive  development  of 
the 
Lithuanian  capital  market,  create  alternative 
financing  channels  for  businesses  –  especially 
SMEs,  provide  additional  investment  opportunities 
for  both  private  and  institutional  investors,  and 
institutions  and 
improve  cooperation  between 
market  participants  to  better  address  market 
needs. 
key 
recommendations  aimed  at  improving  the  legal 
and  tax  framework,  expanding  the  availability  of 
new  financial  products,  further  developing  stock 
exchange activities, improving the environment for 
strengthening 
financial 

intermediaries, 

Guidelines 

forth 

and 

The 

set 

Non-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIs​Insurance corporationsInvestment funds020406080100120   Listed equity               Bonds                        Assets by sector% of GDP 
 
     
the 

financial  literacy.  Certain  key  measures  have 
already been adopted, e.g. amendments to laws on 
investment  by  pension  funds 
in  alternative 
investments,  but  not  all  have  fully  matured  yet. 
Among  the  most  important  achievements  are  the 
implementation  of  some  of  the  amendments  to 
the Law on Companies, the entry into force of the 
investment  account  initiative  and  the  technical 
implementation  of  the  investment  account  tax 
regime  from  1 January  2025,  as  well  as  the 
launch  of 
ILTE  Baltic  Capital  Markets 
Acceleration  Fund.  When  preparing  the  Guidelines 
for  Capital  Market  Development  2026-2028,  it 
was  decided  to  assess,  by  1 March 2026,  which 
existing  or  unimplemented  guidelines  should  be 
continued,  updated  or  revised  to  better  reflect 
today’s realities and market needs. A crucial role in 
the  implementation  of  these  initiatives  is  played 
by the Capital Market Council, a coordinating body 
comprising 
sector 
representatives,  tasked  with  setting  the  main 
policy  directions  for  capital  market  development 
and  ensuring  the  effective  execution  of  the 
recommendations outlined in the Guidelines.  

private 

public 

and 

Households’ participation in capital 
markets 

reduces 

The  relatively  low  saving  rate  of  Lithuanian 
the  availability  of 
households 
funding  for  enterprise  investments.  Roughly 
half  of  the  population’s  savings  are  held  in 
demand  deposit  bank  accounts.  Conversely, 
Lithuanian  households  hold  limited  amounts  in 
pension and insurance funds or directly in financial 
investment  instruments.  Although  the  share  of 
households’ financial assets held in those funds in 
total  financial  assets  has  risen  from  13.5%  in 
2015  to  22.8%  in  2025,  it  still  falls  substantially 
short  of  the  EU  average  of  46.5%.  By  contrast, 
they  hold  more  unlisted  shares  compared  with 
other  EU  countries.   These  investments  offer  the 
chance  to  participate  in  companies,  potentially  at 
lower  valuations  than  they  might  achieve  on  the 
stock  market.  However,  unlisted  shares  also  carry 
significant  risks,  including  lower  liquidity  and 
limited information, requiring careful consideration 
and a long-term investment period. 

Graph A6.3: Composition of households' financial assets 

Source: Eurostat. End-2024. 

In 

The  2025  pension  reform  that  allows  opt-
outs  and  withdrawals  from  private  funds  is 
likely  to  reduce  the  level  of  savings  in 
the  Lithuanian 
June  2025, 
Lithuania. 
Parliament (Seimas) agreed to reform the second-
pillar  pension  scheme,  adopting  amendments  to 
the  Law  on  the  Accumulation  of  Pensions,  as 
proposed by the government, with implementation 
starting in 2026. In a marked reversal, the Seimas 
decided  to  shift  from  the  existing  automatic 
enrolment  model 
in  2019,  to  a 
introduced 
voluntary  system  with  invitations  to  individuals 
under  the  age  of  40  to  join  (‘call  model’). 
According  to  data  collected  by  the  Bank  of 
Lithuania the participation rate in the second pillar 
of  pensions  decreased  by  38%  over  the  first 
quarter of 2026. Meanwhile pension funds’ assets 
under  management  decreased  by  approximately 
41%. This has further reduced Lithuania's already 
very  low  level  of  pension  savings  in  all  types  of 
pension  product  (12.2%  of  GDP  at  the  end  of 
2024).  Besides  the  opt-out  possibility,  the  new 
provisions  also  allow  far-reaching  withdrawal 
options  with  loose  conditions  (partial  and  full 
withdrawals  of  the  accumulated  savings).  The 
reform represents a departure from good practices 
aimed  at  incentivising  saving  for  retirement  (92) 
and  may  not  only  lead  to  lower  public  pension 
replacement 
further 
rates  but  also 
undermining  capital  market  development  and 
finance.  Long-term 
to 
complicating  access 
economic growth and competitiveness can only be 
achieved by avoiding destabilisation of the pension 

risks 

(92)  See EU Recommendation 2025/2384 of 20 November 2025 
on pension tracking systems, pension dashboards and auto-
enrolment. 

63 

050100150200250020406080100LTEULTEUper capita (000 EUR) (lhs)% of GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
     
 
regime  often 

system  and  instead  strengthening  it  and  letting 
people  engage in  long-term  financial  planning  for 
retirement  (93).  This  can  greatly  support  pension 
adequacy  and  allow  for  more  capital  to  flow 
towards  local  businesses.  At  the  same  time,  the 
remains  perceived  as 
annuity 
unattractive,  discouraging  savers  who  would 
otherwise  be  inclined  to  continue  saving  in  the 
second-pillar  pension  scheme.  In  this  respect,  the 
findings  in  the  context  of  the  Technical  Support 
Instrument  (TSI)  project  kicked  off  in  September 
2024 between the Commission and Lithuania can 
provide  insights  in  how  to  make  Lithuania’s 
pension  system  more  robust  and  effective  and 
achieve  positive  effects  on  pension  adequacy  as 
well as long-term fiscal sustainability. The pension 
tracking  system  in  Lithuania  is  primarily  centred 
on Sodra (the State Social Insurance Fund Board), 
which  manages  the  first  and  part  of  the  second 
pillar  of  the  national  pension  system.  Residents 
can  track  their  pension  accumulation,  state  social 
insurance  contributions,  and  projected  retirement 
benefits  through  the  Sodra  personal  account 
system. 

Financial  literacy  levels  in  Lithuania  are  in 
line  with  the  EU  average.  The  Ministry  of 
Finance  recently  approved  a  financial  education 
(2024-2028)  with  particular  attention 
plan 
dedicated  to  challenges  for  consumers  and  retail 
investors, and which also covering SMEs. The level 
of financial literacy in Lithuania is in line with the 
EU  average.  The  2023  Eurobarometer  survey 
showed that 25% of Lithuanians have a high level 
of financial literacy, 54% a medium level, and the 
remaining 21% a low level. 

In an effort to boost household investment in 
capital  markets,  an 
investment  account 
product  has  been  operational  since  the 
beginning  of  2025.  From 
the 
investment  account  tax  regime  also  became 
applicable. Following the amendments to the Law 
on Personal  Income Tax,  taxation on capital  gains 
will  only  be  due  when  funds  are  withdrawn,  and 
only  when  the  amount  withdrawn  from  the 
investment  account  exceeds  the  amount  of  funds 
deposited.  This  encourages  long-term  investment 

that  date, 

(93)  A  gap  analysis  of  the  2nd  pillar  of  the  Lithuanian  pension 
is 
system  compared  with 
provided here: Technical Support in transforming the existing 
fully state-administered funded pension scheme in Lithuania 
- Reforms and Investments , direct link to gap analysis: here.  

international  good  practice 

and 

financial 

investment 

peer-to-peer 

strategies  and  enables  investors  to  grow  their 
capital  over  time.  The  primary  objective  of  these 
amendments  is  to  simplify  the  taxation  and 
declaration  of 
income, 
creating better conditions for Lithuanian residents 
to invest continuously in a broad range of financial 
products:  (i)  stocks  and  bonds,  (ii)  investment 
funds  such  as  mutual  funds  and  ETFs,  (iii) 
crowdfunding 
lending 
opportunities,  and  (iv)  derivatives like  options  and 
futures.   By  combining  favourable  tax  treatment 
with  flexible  features,  the  investment  account  is 
intended  to  create  a  stronger  culture  of  investing 
among 
the 
investment account will depend on the provision of 
legal certainty in its practical implementation. The 
amendments also provide for a gradual phase-out 
of 
life 
related 
insurance  and  third-pillar  pension  contributions, 
which will continue to be applied over the next 10 
years  to  contracts  concluded  up  until  the  end  of 
2024.  

(94).  The  success  of 

long-term 

incentives 

residents 

tax 

to 

The banking sector: resilience and 
financing of the economy 

Lithuania’s  banking  sector  remains  resilient, 
with  most  performance  indicators  ranking 
among the best across the EU, so its lending 
is  not  constrained.  The  sector’s 
capacity 
resilience is bolstered by strong capitalisation and 
asset-quality  metrics,  with  a  capital  adequacy 
ratio of 22.1% at the end of Q3-2025, above the 
EU  average  of  20.2%  (Table  A6.2).  This  ratio 
comes  with  a  high  level  of  high-quality  loss-
absorption  capital,  as  the  CET1  ratio  stood  at 
20.6% in Q3-2025, well above the EU average of 
16.8%.  Thanks  to  the  strong  and  stable  domestic 
customer-deposit  base,  credit  institutions  do  not 
need to draw on additional funding from financial 
markets  nor  do  they  rely  heavily  on  their  cross-
border  parent  banking  groups.  The 
liquidity 
coverage  ratio  was  nearly  400%  in  Q3-2025, 
according  to  the  EBA  Risk  dashboard,  the  highest 
level in the EU (95). Despite their high liquidity and 

(94)  See EU Recommendation 2025/2029 of 30 September 2025 
on  increasing  the  availability  of  savings  and  investment 
accounts with simplified and advantageous tax treatment. 

(95)  Note that the Revolut Group has a significant upward impact 
on the average liquidity ratio of the banking sector due to its 
specific business model.  

64 

 
 
 
ample  deposits,  Lithuanian  banks  convert  a 
smaller  proportion  of  these  deposits  into  loans 
than occurs in other EU countries, due to structural 
inefficiencies  (such  as  risk  aversion  and  high 
market  concentration).  The  accumulated  excess 
liquidity  together  with  a  predominant  share  of 
variable-rate  loans  in  the  wake  of  higher  key 
interest  rates  has  led  to  an  increase  in  the 
profitability ratios of Lithuanian banks; the return-
on-equity ratio was 17.9% at the end of Q3-2025, 
almost twice as high as the EU average. For total 
net  operating  income,  both  the  net  fee  and 
commission  income  as  well  as  the  net  interest 
income are among the highest of the EU.  

interest 

Although  credit  growth  recovered  recently 
for  both  households  and  NFCs,  the  ratio  of 
bank loans to GDP is among the lowest in the 
EU.  The  combined  ratio  of  Lithuanian  bank  loans 
to households and businesses relative to GDP has 
recently  been  below  its  long-term  trend,  and 
significantly  below  the  EU  average  (37.8%  as  of 
end Q3-2025 vs the EU average of 72.9%). Credit 
growth  has  been  on  a  general  downward  path 
since  September  2022,  both  for  households  and 
NFCs. Demand from borrowers declined as a result 
of  higher 
rates  and  heightened 
uncertainty,  while  the  lending  capacity  of  banks 
was  not  overly  constrained.  Over  2024,  credit 
growth  recovered,  as  lending  standards  eased  on 
the  back  of  expectations  of  monetary  policy 
easing. For households, the adjusted annual credit 
growth  rate  for  loans  gradually  edged  up  from 
6.5% in March 2024 to 15.1% in November 2025. 
For  NFCs,  annual  credit  growth  recovered  from 
2.9% in August 2023 to reach 20.1% in Q3-2025. 
Demand from companies was positively influenced 
by capital investments and declining interest rates. 
Lithuanian  banks’  balance  sheets  are  relatively 
more exposed to smaller and riskier companies. On 
a  cross-border  consolidated  basis,  i.e.  including 
foreign  operations,  the  share  of  loans  to  SMEs  in 
total loans to NFCs increased from 37.5% at end-
2019  to  66.8%  at  end  Q3-2025,  way  above  the 
EU  average  of  40.5%,  but  explained  by  the 
predominance of SMEs in the Lithuanian corporate 
sector.  Overall,  the  indebtedness  of  businesses 
and  households  remained  stable,  as  indicated  by 
the 52.4% private sector debt-to-GDP ratio at the 
end of 2024 according to Eurostat data. 

Role of non-bank financial 
intermediaries 

is  still  considerably 

The  role  of  the  non-bank  financial  sector  in 
the  economy 
less 
important than in other  euro area  countries.  
At  the  end  of  2024,  the  Lithuanian  second-pillar 
pension  funds  had  accumulated  around  EUR 9.6 
billion of assets (12.2% of GDP vs EU average of 
32.3%  of  GDP),  with  84%  of  them  held  in 
investment  fund  shares  or  units.  Debt  securities 
are  the  second  largest  investment  asset  held  by 
pension  funds,  while  equities  only  constitute 
around 2%  (96). Lithuania has taken a very liberal 
stance  on  international  investments.  For  example, 
in 2024, only 12% of assets under management in 
second  pillar  pension  schemes  were  invested  in 
Lithuania  and  only  around  1%  of  that  amount  in 
equity. Providing a wider range of financial market 
instruments  traded  on  the  capital  markets  could 
diversify  the  pension  funds  industry’s  investment 
portfolio  and  render  its  role  in  the  country’s 
funding  chain  more  significant.  The  investment 
portfolio  of  Lithuanian  insurers  is  even  more 
conservative.  The  Lithuanian 
insurance  sector 
mainly invests in bonds, which represented around 
60%  of  total  assets  by  Q1-2025  (compared  with 
20% for the EEA) (97), the bulk of which consisted 
of government debt securities, with nearly 95% of 
them  being  issued  by  EEA  countries.  Another  7% 
was held in cash and deposits.  

capital 

investment 

The  provision  by  domestic 
institutional 
investors  of  funding  for  start-ups  and 
venture 
decreased 
considerably  over  2024  compared  with 
previous years. This is most probably due to the 
fact  that  most  fundraising  in  2024  came  from 
venture  capital  (VC)  funds  focusing  on  earlier 
stage  investing,  where  pension  fund  activity  and 
equity  tickets  provided  are  smaller (98).  Recent 
Market Overview data show that pension funds in 
Lithuania  accounted  on  average  for  13%  of 

(96)  Lietuvos  bankas,  Pension  fund  balance  sheet  statistics 
(https://www.lb.lt/en/m_statistics/t-pension-fund-balance-
sheet-statistics/?export=pdf) 

(97)  Source:  Bank  of  Lithuania,  Review  of  Lithuania's  insurance 

market (2025/Q1); EIOPA Insurance Statistics. 

(98)  KPMG  (2025),  Baltic  Private  Equity  and  Venture  Capital 

Market Overview 2024. 

65 

 
 
private equity (PE) and VC funds raised over 2024, 
a figure in line with the other Baltic states.  

behind  the  EU  average  (0.3%  in  2024,  vs  the  EU 
average of 0.5%).  

Venture capital ecosystem 

business 

streamlined 

Lithuania  has  implemented  several  policies 
to  attract  more  foreign  investment  and 
nurture  homegrown  start-ups.  These  policies 
include 
registration 
processes  and  financial  support  for  innovative 
projects.  The  Lithuanian  government  also  offers 
various  grant  programmes  and  schemes 
to 
mobilise  VC  investment  to  support  start-ups. 
Lithuania’s regulatory environment is conducive to 
innovation and entrepreneurship through initiatives 
focused  on  promoting  fintech  innovation,  like  the 
regulatory  sandbox  and  the  newcomers  program, 
both  managed  by  the  country’s  central  bank.  The 
government  has  also  taken  steps  to  simplify 
licensing  procedures,  reduce  bureaucracy  and 
create  a  business-friendly  environment.  This 
approach makes it easier for start-ups to navigate 
legal  and  regulatory  requirements.  A  significant 
proportion  of  the  start-ups  operate  in  the  fintech 
industry, whose importance in Lithuania’s financial 
system  continues  to  grow.  Lithuania  now  ranks 
first  in  the  EU  by  the  number  of  licensed  fintech 
companies.  

the 

proportion 

The  establishment  of  VC  funds  in  Lithuania, 
as in the other Baltic countries, still depends 
on public co-funding. It takes place through co-
investments from the state budget, EU  funds, the 
EBRD and the European Investment Fund, pension 
funds,  and  private  investment  funds.  Government 
agencies  remain  a  key  funding  source  for  local 
fund  managers  with 
of 
government-sourced  capital  around  one  third, 
comparable  to  that  of  the  other  Baltic  countries 
(100).  There  is  also  high  level  of  cross-border 
activity  in  the  PE  and  VC  industry,  where  fund 
managers  operate  across  the  Baltic  countries.  In 
this respect, there is a need to overcome regional 
fragmentation  that  stems  from  the  use  of  public 
funds  as  well  as  to  tap  into  the  unused  potential 
of  pension  funds  (currently  90%  of  Lithuanian 
pension  funds’  assets  are  invested  abroad). This 
may  prove  challenging  given 
liquidity 
management  following  the  two-year  withdrawal 
window  opened  by  the  second  pillar  reform  and 
the  abolition  of  automatic  enrolment  that  would 
have been helpful in rebuilding depleted capital. 

the 

as 

the 

fastest-growing 

The start-up ecosystem has driven VC and PE 
funding  levels.  Lithuania  has  maintained  its 
position 
start-up 
ecosystem  in  the  Baltic  region:  the  combined 
enterprise  value  of  Lithuanian  start-ups  grew 
seven  times  larger  between  2019  and  2024, 
against a Baltic growth average of 2.5 times and a 
European  average  of  2.3.  Most  investment  went 
the 
into  Lithuanian  companies  operating 
consumer  services  sector,  including  fintech,  ICT, 
games  development,  biotech  and  lasertech  (99).  In 
2025,  start-ups  in  the  country  raised  a  total  of 
EUR 220  million,  marking  a  considerable  increase 
on  a  year  earlier.  Despite  this,  according  to  the 
capital markets union dashboard, Lithuania hovers 
around  the  EU  average  (0.064%)  in  terms  of 
annual  VC  investments  relative  to  GDP,  with 
0.057%  over  2022-24.  In  terms  of  annual  PE 
investments  relative  to  GDP  the  country  lags 

in 

(99)  The  Lithuania  start-up  ecosystem  2024,  Dealroom,  Feb 

2025. 

(100) In  2024  government  funding  still  accounted  for  31%  of  VC 
raised, an increase from 23% in 2019. Source: KPMG, LTVC, 
LVCA,  ESTVCA,  Baltic  Private  Equity  and  Venture  Capital 
Market Overview 2024. 

66 

 
 
 
 
 
Table A6.2: Financial sector indicators 

Annualised data. EU data on credit growth and the ECB pension funds refer to the EA average. 
PE and VC, % of GDP is calculated as a three-year moving average. 
Source: ECB, ESTAT, OECD, CMU Dashboard, AMECO. 

67 

20182019202020212022202320242025-Q3EUTotal assets of MFIs, % of GDP65.465.478.878.285.685.596.1105.7246.1Common equity Tier 1 ratio18.419.521.523.220.218.621.120.616.8Total capital adequacy ratio18.619.921.923.520.419.922.622.120.2Overall NPL ratio, % of all loans2.61.72.21.20.90.80.70.51.9NPL ratio, loans to NFCs4.12.93.51.71.51.41.41.13.5NPL ratio, loans to HHs3.02.11.81.00.81.21.11.12.1Return on equity ratio112.314.510.010.413.521.218.717.99.6Loans to NFCs, % of GDP18.717.414.815.415.314.415.416.629.3Loans to HHs, % of GDP21.021.122.021.620.319.520.221.243.6NFC credit growth rate, %4.7-0.8-12.711.718.54.613.920.12.5HH credit growth rate, %8.67.26.510.711.36.69.814.82.6Stock market capitalisation, % of GDP7.37.59.09.17.16.16.16.269.9Initial public offerings, % of GDP0.190.033.300.000.000.000.00-0.06Market funding ratio21.722.336.736.233.131.528.7-49.7Private equity, % of GDP0.1900.2780.3210.4860.3860.4440.286-0.487Venture capital, % of GDP0.0070.0080.0140.0390.0710.0750.057-0.064Financial literacy, composite index-----43.5--45.5Bonds, % of HHs' financial assets0.91.01.10.50.81.31.3-2.8Listed shares, % of HHs' financial assets1.61.61.72.21.92.02.3-4.8Investment funds, % of HHs' financial assets1.71.71.72.32.22.22.7-11.0Insurance/pension funds, % of HHs' financial assets11.912.912.913.912.914.216.5-27.8Total assets of insurers, % of GDP3.02.53.02.72.42.42.52.553.9Pension assets, bn EUR---6.15.87.59.6-5813.8Pension assets, % of GDP---10.88.710.112.2-32.310y real return average of pension assets, %-----0.20.5-1.4Pension funds assets, ECB (% of GDP)-8.29.310.88.710.012.112.623.01-34-1011-1718-2425-27Colours indicate performance ranking among the 27 EU Member States.Banking sectorNon-banking sector 
 
 
 
     
 
ANNEX 7: EFFECTIVE INSTITUTIONAL FRAMEWORK 

trust  built  on 

institutional  framework 

An  effective 
is 
essential  for  competitiveness.  This  requires 
public 
integrity,  high-quality 
legislation,  regulatory  simplification  and  efficient 
services  for  people  and  businesses.  For  Lithuania, 
recommendations 
the  2025  country  specific 
highlighted the need to reduce regional disparities 
by improving the legal and institutional framework 
inter-municipal  cooperation  and 
to  promote 
development  of 
to  attract 
clusters 
investments to  regions  (101).  (see  Annexes  18  and 
5) 

local 

Public trust 

Graph A7.1: Trust in the justice system, regional / local 
authorities and in government 

(1) EU-27 since 2019; EU-28 before 
Source: European Commission, Standard Eurobarometer 
surveys 

Lithuania  currently  has  a  variable,  but 
relatively  consistent  level  of  public  trust. 
Trust  in  government  improved  between  2023 
(Lithuania  29%;  EU  32%)  and  2025  (Lithuania 
34%; EU 33%) with a high of 45% in spring 2025. 
Trust  in  the  judiciary  and  legal  system  and  in 
regional or local authorities have improved to align 
with  the  current  EU  average  (57%  and  61% 
respectively). Both the public and businesses trust 
that 
the 
the  public  administration  protects 
personal and company data that it collects (102).  

Quality of lawmaking and 
implementation 

has 

(104). 

lawmaking  broadly 
Lithuania's  rules  for 
conform  to  best  practice  by  reducing  the 
regulatory  burden  and  ensuring  effective 
for 
implementation,  albeit  with  scope 
improvement (103) (Table A7.1). When developing 
primary  and  secondary  laws  the  procedure  for 
level  of  compliance  could  be 
assessing  the 
high-level 
Lithuania 
improved 
requirements  for  regulatory  impact  assessment 
(RIAs),  consultation  and  ex  post  evaluation.  RIAs 
are mandatory for all primary laws. Consultation is 
is  drafted.  This 
required  once  a  regulation 
obligation  was  updated  in  2022  to  determine 
more clearly when the public should be consulted, 
the  purpose  of  the  consultation  and  what  data 
should  be  collected.  A  procedure  for  ex  post 
evaluation  was 
in  2021,  which 
introduced 
determines  i)  the  objectives,  ii)  the  scope  of 
applications, iii) the roles of those involved, and iv) 
subordinate 
application 
extending 
regulations. It includes an assessment of whether 
laws  achieve  their  objectives  and  the  associated 
costs and benefits. 

its 

to 

Weak coordination at the central government 
levels  and limited  assessment  of  the  impact 
of  policy  on  regions  are  hindering  efforts  to 
tackle  regional  disparities  (See  Annex  18). 
Institutional  fragmentation  hampers  the  response 
to  challenges  such  as  housing,  mobility  and  local 
development.  Regional  policy  funding  replicates 
the  fragmentation  and  addresses  symptoms 
rather than causes. An ongoing reform focuses on 
defining 
in  regional  policy, 
supporting  regional  strategies  and  strengthening 
regional institutions.  

institutional  roles 

to 

reinforce 

is  working 

Lithuania 
the 
governance framework for effective regional 
policy 
Support 
Instrument.  Recent  legislative  amendments  aim 
inter-municipal 
to 
cooperation  for  public  service  provision,  including 

bottlenecks 

Technical 

resolve 

under 

the 

in 

(101) 2025 European Semester: Country Specific 

Recommendations / Commission Recommendations - 
European Commission 

(103) OECD, 2025, Lithuania: OECD Regulatory Policy Outlook 

2025. 

(102) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(104) OECD, 2025, Regulatory Policy Outlook 2025, OECD 

Publishing, Paris, https://doi.org/10.1787/56b60e39-en 

68 

00.10.20.30.40.50.60.70.80.9AutumnSpringAutumnSpringSpringAutumnWinterSummerWinterSpringWinterSummerAutumnSpringAutumnSpringAutumnSpring202520242023202220212020201920182017Justice,  legal system EU-27Justice,  legal system LTRegional or local public authorities EU-27Regional or local public authorities LTGovernment  EU-27Government  LT 
 
     
 
 
 
 
Table A7.1: Lithuania. Selected indicators on better regulation practices for primary legislation 

Source: OECD, 2025, Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025   

public-transport  coordination.  The  government  is 
working  to  strengthen  the  legal  and  institutional 
framework  to  develop 
local  clusters,  attract 
investment  and  enhance  the  provision  of  public 
services.  

Public service delivery and 
digitalisation 

in  ensuring 

Lithuania continues to make good progress in 
digitalising  its  public  services  but  faces 
challenges 
seamless  user 
experiences.  Overall  people  are  satisfied  with 
public administration (Lithuania 55%; EU 45%), yet 
43% describe it as complex and burdensome (105). 
People  identify  multiple  issues  such  as  the  time 
spent  accessing  public  services,  which  involves 
identifying  the  correct  service,  processing  and 
waiting  times  (Graph  A7.2).  A  high  proportion  of 
respondents  in  Lithuania  suggest  that  the  area 
most  in  need  of  improvement  is  public  services 
compared  to  other  Baltic  States  and  other  EU 
countries  (Lithuania  50%;  Estonia  41%;  Latvia 
43%;  EU  44%)  (106).  Among  businesses,  43%  are 
public-
satisfied 
report 
administration  services,  whereas  41% 

satisfied  with 

very 

or 

of 

costs 

operational 

increased 
public-
administration services (compared to 30% for EU). 
The most time-consuming aspect for businesses is 
understanding 
and 
gathering  the  required  documents  (Graph  A7.2).  A 
higher  proportion  considers  compliance  and 
reporting  to  be  challenging  (Lithuania  19%;  EU: 
14%).  

requirements 

legislative 

Graph A7.2: Most time-consuming aspects of service delivery 

Source: European Commission, 2026, Flash Eurobarometer 
surveys 567 and 568 on satisfaction with administrative 
services. 

Lithuania  offers  more  digital  public  services 
to the public than the EU average (Table A7.2). 
Digital  adoption  is  also  high,  with  only  8%  of 
people saying they  never use digital  services  (107). 
As  regards  eID  the  average  is  97.2%:  100%  for 
businesses  and  96.4  for  members  of  the  public 

(105) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(106) European Commission, 2025, Flash Eurobarometer survey 
561 Public opinion on urban challenges and investment in 
cities. 

(107) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

69 

0%10%20%30%40%50%ServiceidentificationTime forresponsesDocumentspreparationLegislationandobligationsDocumentspreparationTime forresponsesPeopleBusinessesEUTools for smart legislation: Share of possible impacts assessed for all primary laws when developing legislation 1Regulators are required to identify and quantify the benefits of a new primary law1Regulators are required to identify and assess the impacts of alternative non-regulatory options0Tools for effective implementation: when developing laws, regulators are required to:Assess the level of compliance0Identify and assess potential enforcement mechanisms1Specify the methodology of measuring progress in achieving the law's goals1Oversight of better regulation: There is an external  body responsible for reviewing the quality of RIAs and of ex post evacuations 1There are publicly available assessments of the effectiveness of RIA in modifying regulatory proposals 0There are reports on the level of compliance by government department with the requirements of RIA1There are indicators on the percentage of ex post evaluations that comply with guidelines0The effectiveness of ex post evaluations in improving the regulatory stock has been assessed in the last five years0 
 
     
 
 
     
 
Table A7.2: Digital Decade key performance indicators: availability of digital public services 

(1) Digital Decade target by 2030: 100. (2) Publishing year, data was collected in the previous year 
Source: European Commission, State of the Digital Decade report 2025 

(108). The e-government benchmark results include 
a high score for pre-filled forms (96.5%) and 71% 
of  people  say  that  digital  services  save  time.  On 
the  downside,  according  to  73%  of  people  public 
administration  asks  for the  same  data  repeatedly 
(109).  

digital  siloes  (112)  (113).  For  renewable  energy 
projects steps are handled sequentially rather than 
in  parallel.  Public  resistance  to  new  industrial 
projects  significantly  affects  the  decision-making 
process,  especially  at  municipal  level,  impacting 
both the content and timing of decisions (114).   

Lithuania is among the countries offering the 
most  digital  public  services  to  companies 
(Table  A7.2).  Only  6%  of  businesses  report  that 
they never use digital  services and 86% find that 
digital  public  services  save  time  (110).  Since  2018 
Lithuania  has  been  developing  an  e-government 
gateway  (epaslaugos.lt),  which  provides  life-event 
services. It acts as a central  hub that streamlines 
access  to  essential  public  services  and  helps 
people  find  the  portal  they  are  looking  for.  For 
example,  when  registering  a  business,  the  centre 
of 
receives  company  applications 
through  an  integrated  services  platform,  which 
connects to various state registers to validate and 
auto-fill  data.  After  review  via  JADIS  (Information 
System  for  Participants  of  Legal  Entities),  the 
company 
in  the  Legal  Entities 
Register  (JAR),  and  its  data  are  automatically 
shared  with  the  taxpayers  and  social  security 
registers (111). 

is  registered 

registries 

Lithuania is  working  on  enhancing  its  digital 
permit infrastructure and processes.   There is 
a  complex  institutional  landscape  involving  up  to 
30 
institutional  and  non-institutional  actors. 
System  integration  is  required  to  fully  transform 
this  process:  construction,  environmental  and 
energy  permitting  currently  operate  in  parallel 

Lithuania is involved in a number of projects 
to  modernise  and  streamline  the  licensing 
Instrument 
process.  The  Technical  Support 
supported  Lithuania  by  giving  recommendations 
on  how  to  expand  and  enhance  digital  systems 
and 
the  exchange  of 
facilitate 
the  various  authorities 
information  between 
involved in renewable energy permitting processes 
(115).  

tools 

that 

to 

businesses 

comply  with 

The Ministry of the Economy and Innovation, 
in  conjunction  with  multiple  partners,  is 
implementing  a  project  to  modernise  and 
standardise  the  licensing  process.  The  project 
helps 
legal 
requirements  under  which  all  procedures  relating 
to setting up, running and closing a business must 
be  fully  digitised  and  made  available  online  to 
both  national  and  cross-border  users  throughout 
the European Union. Its purpose is to create a one-
stop  shop  for  accessing  all  services,  thereby 
reducing  the  administrative  burden  on  businesses 
–  both  Lithuanian  and  from  other  EU  countries  – 
when they apply for the permits they need. 

To  strengthen  the  seamless  provision  of 
services,  Lithuania  has  initiated  legislative 

(108) European Commission, 2025, Digital Decade 2025: 

eGovernment Benchmark 2025. 

(112) Improving the efficiency of the construction supervision 

system in Lithuania - Reforms and Investments 

(109) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(113) European Commission, Digital connectivity in Lithuania | 

Shaping Europe’s digital future 

(110) Ibid. 

(114) Semester mission questionnaire for Lithuanian authorities  

(111) European Commission, forthcoming, Simplification of key life 

(115) Lithuania - Reforms and Investments - European 

events. 

Commission 

70 

EU-272023202420252025848788829496938692959583Digital public services for citizens (0 to 100)Digital public services for businesses (0 to 100)Access to electronic health records (0 to 100)Lithuania 
 
 
 
  
 
changes  to  limit  public  administration  in 
terms of asking businesses and the public to 
provide  data  that  is  already  in  a  state 
register  or  system.  For  these  restrictions  to 
work,  however  the  authorities  would  need  to 
improve  interoperability  and  collaboration  if  they 
are 
exchange.  Digital 
data 
infrastructure  is  an  obstacle  to  the  delivery  of 
public  services  in  the  regions  and  to  overcoming 
regional disparities (See Annexes 5 and 18). 

facilitate 

to 

through 

Lithuania  has  enabled  the  cross-border 
exchange  of  data  and  documents  between 
authorities 
the  EU  once-only 
technical  system(116).  As  more  services (117) 
become accessible through the system, the public 
and  businesses  will  no  longer  have  to  search  for 
their  data,  download  and  upload  documents 
manually across e-government portals in different 
Member States. Lithuania still needs to identify the 
types  of  documents  needed  to  exchange  through 
the  system  and  explore  ways  to  shift  from  the 
submission  of  unstructured  to  structured  data 
formats.  Lithuania  has  connected  a  procedure(118) 
in  the  field  of  education  (studying  abroad)  and 
authority registries in the fields of population and 
education are connected. 

Civil service 

higher 

Lithuania  has  a  well-educated  civil  service, 
with 
a  mandatory 
education 
requirement for civil servants and is working 
on  increasing  skills  and  performance.  A  large 
proportion  of  employees  in  public  administration, 
defence  and  compulsory  social  security  have 
higher education (Lithuania 81.9%; EU 54.6%)(119) 
and  participate  in  adult  learning  (120).  A  major 

(116) European Commission, Once-Only Technical System 

Acceleratormeter, Ec.europa.eu. 

(117) Procedure types under Annex II of the 

SDGR (2018/1724/EU) and directives 2005/36/EC, 
2006/123/EC, 2014/24/EU and 2014/25/EU. 

(118) European Commission, 2025, Once-Only services going live! 

Applying for studies in Lithuanian higher education 
institutions, Ec.europa.eu. 

reform  of  the  civil  service  (121),  due  to  be 
implemented in 2026, aims to improve leadership 
professionalism,  flexibility  and  efficiency  in  the 
civil service. It will also modernise human resource 
management and introduce innovations in the civil 
service.  

and 

A  procedure  for  applying  the  civil  service’s 
performance-
strategic-analysis 
evaluation  system  will  be  developed  and 
enshrined  in  legislation.  The  purpose  will  be  to 
monitor  the  implementation  of  indicators  for 
performance  analysis  and  efficiency  evaluation 
(122). In the 2024 EU/OECD survey of public, carried 
out  under  the  Technical  Support 
Instrument, 
Lithuania  scored  lower  than  its  EU  peers  in 
wellbeing and job autonomy (123). Making progress 
in 
the 
attractiveness of careers in the service.  

these  area  may  help 

improve 

to 

Integrity  

Corruption is viewed as less of a concern for 
business in  Lithuania  than  in  the  EU  overall, 
and  reported  experiences  are  even  rarer. 
Although a lower proportion of companies than the 
EU  average say corruption is widespread (56% vs 
EU:  63%),  there  are  major  concerns  about  the 
potential  for  close  links  between  business  and 
politics  to  lead  to  corruption  (Lithuania  84%;  EU 
76%).  Yet  only  21%  see  corruption  as  a  problem 
when  doing  business  (EU:  35%)  (124),  which 
suggests  that  concerns  are  driven  more  by 
perceived  political  influence  than  by  day-to-day 
obstacles for companies. Sectors in Lithuania that 
are  particularly  vulnerable 
in 
Lithuania are public procurement, healthcare, local 
government,  environmental  protection,  territorial 

to  corruption 

education and training (last 4 weeks) by NACE Rev. 2 activity 
(2008-2026). 

(121) Public Administration Reform Project "Civil Service Reform" - 

GOVERNMENT OF THE REPUBLIC OF LITHUANIA 

(122) Valstybės tarnybos pertvarka. 

(119) European Commission, Eurostat, 2026, European Union 

(123) Technical documentation supporting the 2024 EU/OECD 

Labour Force Survey, Employees by educational attainment 
level and NACE Rev. 2 activity (2008-2026). 

Survey of Public Servants: Workforce Insights from Central 
Governments | OECD 

(120) European Commission, Eurostat, 2026, European Union 
Labour Force Survey, Participation rate of employees in 

(124) European Commission, 2025, Flash Eurobarometer survey 
557 on Businesses' attitudes towards corruption in the EU. 

71 

 
 
 
 
bribery.  According 
report, 
27 
Lithuania 
recommendations,  partially  implemented  14  and 
not implemented 8 (131).  

follow-up 
implemented 

to 
fully 

has 

the 

Justice 

The  justice  system  continues  to  perform 
efficiently.  In  2024,  the  time  taken  to  reach  a 
decision  in  civil  and  commercial  cases  in  first-
instance  courts  increased  slightly  to  127  days, 
from 120 days in 2023). It remained the lowest in 
the  EU.  The  estimated  time  taken  to  resolve 
administrative  cases  in  first-instance  courts  was 
also the shortest in the EU. However, this number 
doubled  from  64  days  in  2023  to  140  in  2024. 
There  is  widespread  use  of  digital  tools  in  the 
justice system. Lithuania performs well in i) digital 
solutions  to  initiate  and  follow  proceedings  in 
civil/commercial  and  administrative  cases, 
ii) 
online  access 
to  published 
judgments,  and  iii)  arrangements  for  producing 
machine-readable judicial decisions (132).  

the  public 

for 

planning  and  construction  supervision  (125)  (see 
Annex 5).  

Very  few  companies  report  being  asked  for 
gifts, favours or extra money in exchange for 
permits,  services  or  procurement  (Lithuania 
3%; EU: 10%). A much higher proportion than the 
EU  average  consider  sanctions  for  senior-level 
bribery  to  be  appropriate  (Lithuania  49%;  EU: 
33%)  (126).  This  suggests  limited  exposure  to 
bribery and  a perception of strict enforcement. 

Various  initiatives  are  being  carried  out  to 
prevent  corruption  and  promote  integrity  in 
the  public  and  private  sectors.  The  results  of 
the evaluation of the amendments to the Law on 
Prevention  of  Corruption  were  publicly  presented 
at  a  dedicated  event.  The  objective  was  to 
highlight 
legal 
framework  on  corruption  prevention.  As  regards 
the implementation of that law, the guidelines for 
creating  an  anti-corruption  environment  in  the 
public  sector  were  updated  in  2024,  and  several 
events  were  held  on  the  subject,  attended  by 
business associations (127). 

the  current 

impact  of 

the 

the  STT 

While  Lithuania  continued  its  efforts  to 
combat corruption, majorsteps were taken to 
address  shortcomings  in  the  fight  against 
foreign bribery. In the context of implementation 
of  measures  relating  to  foreign  bribery  (128),  in 
(Lithuania’s  special 
October  2025, 
investigation service) published tailored guidelines 
intended  for  all  companies, 
institutions  and 
organisations involved in international transactions 
and  financial  flows.  The  objective  was  to  identify 
potential  cases  of  bribery  of  foreign  officials  and 
to  provide  information  on  how  to  report  such 
incidents  (129).  On  18  December  2025,  the  OECD 
in 
Lithuania’s 
acknowledged 
implementing  the  2023  recommendations  (130)  to 
address  shortcomings  in  the  fight  against  foreign 

progress 

(125) European Commission, 2025 Rule of Law Report, p.10. 

(126) European Commission, 2025, Flash Eurobarometer survey 
557 on Businesses' attitudes towards corruption in the EU. 

(127) Euroepan Commission, 2025 Rule of Law Report, p.9. 

(128)European Commission, 2025 Rule of Law Report, Lithuania, 

pp. 8-9. 

(129)Guidelines for Identifying and Reporting Cases of Money 

Laundering Related to the Bribery of Foreign Officials, Special 
Investigation Service, 2025, STT official website.  

(130)OECD (2023). 

(131) OECD (2025). 

(132) For  a  more  detailed  analysis  of  the  performance  of  the 
justice  system  in  Lithuania,  see  the  upcoming  2026  EU 
Justice Scoreboard and the 2025 Rule of Law Report. 

72 

 
 
 
SUSTAINABILITY 
ANNEX 8: INDUSTRY DECARBONISATION, CIRCULARITY AND CLIMATE MITIGATION 

country-specific 

industry  and 

industrial  production, 

Lithuania  faces  challenges  regarding  the 
decarbonisation  of 
road 
transport, the circular economy, and resource 
productivity  and  efficiency.  For  Lithuania,  the 
2025 
recommendations 
highlighted  challenges  in  the  transformation  and 
the 
decarbonisation  of 
uptake  of  public  and  sustainable 
transport, 
resource  productivity  and  efficiency,  and  the 
progression towards a circular economy. Lithuania 
is  taking  steps  to  address  its  decarbonisation 
challenges, including by making funding available, 
but  progress  remains  slow.  While  it  has  made 
progress  over  the  past  year  in  municipal  waste 
landfilling, 
management,  notably  by  reducing 
several challenges remain. These include the slow 
transition  to  a  circular  economy  and  low  resource 
productivity. 

Industry decarbonisation 

Greenhouse gas emissions from industry 

came 

(GHG) 

In 2024, 14% of Lithuania’s total greenhouse 
gas 
from 
emissions 
manufacturing (133). The manufacturing sector is 
relatively  emissions  intensive,  with  a  major  share 
of emissions coming from industry processes and 
product  use.  At  14%,  the  share  of  industry  in 
Lithuania’s  total  GHG  emissions  is  below  the  EU 
average  of  17% (134).  The  GHG  emission  intensity 

(133) This  Annex  discusses 

the 

industry,  specifically 

transition  of  Lithuania's 
manufacturing 
its  energy-intensive 
industries, to low-carbon and net-zero modes of production, 
which  is  key  to  preserving  competitiveness  on  the  path 
towards  climate  neutrality  as  mandated  by  the  European 
Climate  Law.  A  broader  perspective  on 
the  current 
competitiveness challenges facing Lithuania's manufacturing 
industry  is  provided  in  Annex  5.  For  a  more  detailed 
description  of  greenhouse  gas  emissions  from  industry,  see 
European  Commission  (2025),  2025  Country  Report  - 
Lithuania, Commission staff working document, SWD (2025) 
205  final,  Brussels,  4.6.2025,  Annex  A7.  Clean  industry  and 
climate  mitigation.  –  The  above  figure  excludes  NACE 
division  C19  (manufacture  of  coke  and  refined  petroleum 
products).  

(134) Data on the manufacturing sector exclude the NACE division 
C19 – manufacture of coke and refined petroleum products, 
for  better  match  of  the  sectoral  data  from  Eurostat  (gross 
value  added)  with  those  from  the  UNFCCC  under  the 
Common  Reporting  Format.  Also  see  further  indicators  on 

73 

production 

of  Lithuania’s  manufacturing  production  was 
360 g CO2eq per euro of gross value added (GVA) 
in  2022.  Since  2019,  the  GHG 
intensity  of 
has 
Lithuania’s  manufacturing 
decreased  by  23%,  which  is  more  than  the  EU 
average  (19%).  Nearly  two  thirds  of  Lithuania’s 
manufacturing  GHG  emissions  –  65%  in  2023  – 
come  from  industrial  processes  and  product  use, 
with the remainder being energy related. Between 
2018 and 2023, the energy-related GHG emission 
intensity  of  manufacturing  improved  by  27%, 
above the EU average of 20% (135). 

Policies to promote industry decarbonisation 

is  provided  primarily 

Policies  to  promote  the  decarbonisation  of 
industry  in  Lithuania  largely  draw  on  EU 
funding. The Modernisation Fund supports several 
industrial  decarbonisation  projects,  such  as  the 
EUR 42 million  project  for 
‘Decarbonisation  of 
industry through energy efficiency and substitution 
of polluting technologies with less polluting ones’, 
for which the first call was published in July 2025. 
In  addition,  Lithuania  has  received  a  further 
EUR 11 million  from  the  Modernisation  Fund  to 
accelerate the deployment of renewable energy in 
to 
industry.  Support 
manufacturing installations participating in the EU 
emissions trading system, to help them install new 
renewable  energy  capacity  and  expand  existing 
funds  also 
infrastructure.  Cohesion 
substantially  contribute  to  decarbonisation  of 
industrial  production.  Funds  from  the  European 
Regional  Development  Fund  and  Cohesion  Fund 
energy-efficiency 
support 
(EUR 41 million) 
measures  by 
the 
deployment  of  renewable  energy  solutions  for 
production  lines  and  technologies.  In  addition,  the 
Just  Transition  Fund  (EUR 273 million)  focuses  on 
reducing GHG emissions and creating opportunities 
for  economic  diversification  for  enterprises  and 
people working in the territories most affected by 
the transition towards a climate neutral economy, 
namely  Kaunas,  Telšiai  and  Šiauliai  counties, 
where 
industrial 
installations are situated. 

the  highly  GHG-intensive 

industrial  enterprises  and 

policy 

industry  decarbonisation,  as  well  as  the  annotation  for 
further information, in table A8.1 at the end of this Annex. 

(135) See European Commission, 2025 Country Report – Lithuania, 
Commission staff working document, SWD (2025) 205 final, 
Brussels,  4.6.2025,  Annex  A7.  Clean  industry  and  climate 
mitigation, pp. 61ff. 

 
 
 
 
 
 
 
 
Lithuania  is  taking  some  steps  to  promote 
the  transformation  and  decarbonisation  of 
industrial  production,  however  a  harmonised 
approach is missing. In an effort to address the 
2025 recommendation on decarbonising industrial 
production, national legislation on the propagation 
of  carbon  capture  and  storage  technology  will  be 
put in place in 2026. It will designate a competent 
regulator  and  a  network  operator,  lay  down  rules 
on  unbundling  and  permissible 
infrastructure 
ownership  models,  set  conditions  for  third-party 
access 
tariff  mechanisms. 
Furthermore,  a  one-stop  shop,  the  ‘GreenTech 
Hub’,  was  set  up  in  2024  within  the  Innovation 
information  on  funding 
Agency. 
prepare 
opportunities 
an 
how 
application (136). 
Invest  Lithuania 
In  addition, 
serves  as  a  single  point  of  contact  for  permitting 
procedures. 

It  provides 

establish 

and 

and 

to 

Reduction of effort sharing emissions 

Compliance  with  effort  sharing  limits  with 
domestic measures 

is  projected 

to 
For  2030,  Lithuania 
overachieve  its  effort  sharing  target (137).  In 
2024,  GHG  emissions  from  Lithuania’s  effort 
sharing  sectors  are  expected  to  have  been  2% 
above  those  of  2005.  By  2030,  with  current  and 
planned  policies  and  measures,  these  emissions 
are expected to decrease by 21.2%, resulting in a 
surplus  of  0.2  percentage  points  relative  to  the 
2030  target  of  −21%.  Lithuania  is  projected  to 
exceed 
limits 
temporarily  in  the  2021-2030  period  but  could 

sharing  emission 

its  effort 

(136) See more information here. 

(137) The  national  GHG  emission  reduction  target  is  set  out  in 
Regulation (EU) 2018/842 (the Effort Sharing Regulation). It 
applies  jointly  to  buildings  (heating  and  cooling),  road 
transport,  agriculture,  waste  and  small  industry  (known  as 
the effort sharing sectors). The emissions from effort sharing 
sectors for 2024 are based on approximated inventory data. 
The  final  data  will  be  established 
in  2027  after  a 
comprehensive  review.  Projections  about  the  impact  of 
current  policies 
(‘with  existing  measures’,  WEM)  and 
additional  policies (‘with  additional  measures’,  WAM)  as  per 
Lithuania’s  2025  reporting  under  Article  17  of  Regulation 
(EU)  2018/1999  (the  Governance  Regulation).  Also  see 
European  Commission  (2025),  Climate  Action  Progress 
Report  2025  –  Technical  Information,  Commission  staff 
working  document,  Brussels,  Chapter  9  (pp. 111ff.),  and  in 
particular Tables 25 and 26. 

cover  the  gap  with  unused  annual  emission 
allocations  from  other  years  to  comply  with  the 
Effort Sharing Regulation. 

Sustainable transport 

transport 

remains  dominant 

Road 
in 
Lithuania’s  transport  sector,  underscoring 
the  slow  pace  of  decarbonisation  efforts  to 
date.  Lithuania’s  old  car  fleet  remains  a  key 
factor  behind 
its  GHG  emissions  from  road 
transport.  In  2024,  44%  of  Lithuania’s  effort 
sharing  emissions  came  from  road  transport,  and 
they  have 
from  2005 
increased  by  41% 
levels (138). Car dependence is extremely high, with 
92.1%  of  inland  passenger  journeys  made  by  car 
in  2023 (139).  Between  December  2019  and 
December  2024, 
registered 
passenger  cars  in  Lithuania  increased  by  15%, 
which  is  among  the  highest  increases  in  the 
EU (140).  In  addition,  the  car  fleet  is  old  and 
polluting;  27.6%  of  the  passenger  car  fleet  is  20 
years  old  or  more,  and  48.7%  is  between  10  and 
20  years  old (141),  and  in  2024  71.5%  of  newly 
registered  passenger  cars  were  petrol-powered 
(including hybrids) (142). 

the  number  of 

Facility, 

the  2025 

Lithuania  is  taking  some  measures  to  try  to 
recommendation  on 
address 
increasing 
the  uptake  of  public  and 
sustainable  transport,  however  success  is 
limited.  Support  is  provided  for  the  purchase  of 
battery  electric  vehicles,  under  the  Recovery  and 
Resilience 
European  Regional 
the 
Development  Fund,  the  Cohesion  Fund  and  the 
Modernisation  Fund,  to  accelerate  the  renewal  of 
the  vehicle  fleet  and  encourage  the  uptake  of 
cleaner  vehicles.  In  addition,  municipalities  are 
required  to  prepare  and  approve  plans  for  the 
installation  of  publicly  accessible  charging  points; 
all  60  municipalities  have  now  prepared  their 
plans.  Despite  these  initiatives,  electric  vehicle 
penetration  remains  low  for  private  use;  in  2024, 
only 5.9% of newly registered passenger cars were 
battery electric, which is below the EU-27 average 

(138) See Graph A8.1, and Table A8.1 at the end of this Annex. 

(139) Eurostat data: tran_hv_psmod. 

(140) Eurostat, 2026, Passenger cars in the EU, Link. 

(141) Eurostat, 2026, Passenger cars in the EU, Link. 

(142) EEA, 2025, New registrations of electric cars in Europe, Link. 

74 

 
 
 
of  13.6%  (143).  As  regards  public  transport,  just 
7.9% of passenger journeys were made by trains, 
coaches, buses and trolley buses in 2023 (144). An 
integrated  travel  planning  and  single  ticketing 
system  is  currently  being  developed  as  part  of 
Lithuania’s  Social  Climate  Plan  and  is  planned  to 
be  deployed  by  end-2028,  which  could  make 
public  transport  a  more  attractive  option.  The 
cross-border  Rail  Baltica  railway  project,  which 
aims  to  increase  connectivity  between  the  Baltic 
states and the rest of the EU, is crucial for shifting 
transport  from  road  to  rail  and  therefore  boost 
sustainable  mobility.  In  the  context  of  soaring 
costs,  however,  its  completion  is  not  expected 
before 2030. 

Graph A8.1: Greenhouse gas emissions in the effort sharing 
sectors, 2005, 2023, 2024 

Source: European Environmental Agency 

Rail transport continues to present untapped 
potential  for  decarbonising  the  transport 
sector.  In  2023,  only  1%  of  all  inland  passenger 
journeys  in  Lithuania  were  by  rail,  which  is  the 
second lowest share in the EU and below the EU-
27  average  of  8.4%  (145).  By  contrast,  rail 
accounted  for  30.1%  of  freight  transport  in 
Lithuania in 2024 (146) compared with an average 
of  5.4%,  but  still  a  decrease  of  7.1  percentage 
points  since  2022  (147).  To  decarbonise  transport, 
Lithuania could greatly benefit from electrifying its 
railways.  Currently,  only  8.1%  of  the  railway 
network is electrified (EU-27 average: 57.6%) (148). 
The  electrification  of  the    Kaišiadorys-Klaipėda 

(143)EEA, 2025,  

New registrations of electric cars in Europe, 

Link. 

(144)Eurostat data:   tran_hv_psmod 

(145)Eurostat data:   tran_hv_psmod 

(146) Eurostat:  tran_hv_ms_frmod 

(147)Eurostat data:   tran_hv_ms_frmod 

(148)Eurostat data:   tran_r_net and rail_if_line_tr 

line,  as  currently  planned,  would  significantly 
increase this share. 

for 

zero-emission 

improve  fiscal 
Lithuania  has  scope  to 
incentives 
vehicles, 
including  trucks.  As  regards  toll  exemptions  for 
zero-emission  vehicles,  Lithuania  has  drawn  up 
legislation  to  introduce  tolls  that  would  better 
reflect the infrastructure use and external costs of 
heavy-duty  vehicles,  but  has  not  implemented  it 
yet.  Lithuania  has  some  of  the  lowest  transport 
taxes in the EU and is one of the few EU countries 
without  an  annual  car  pollution/circulation  tax, 
thus  missing  out  on  an  incentive  for  a  shift 
towards  more  sustainable  transport.  Instead  of 
encouraging  the  purchase  of  cleaner  cars,  the 
current model – a one-time fee paid at registration 
or  ownership  change  —  encourages  owners  to 
keep  older,  high-emission  cars.  This  preserves  a 
fleet  where  63.4%  of  vehicles  remain  diesel-
powered,  stalling  the  natural  turnover  of  the 
market (149). 

Sustainable industry 

Circular economy industry 

a 

received 

to  progress 

As  stated  in  last  year’s  country  report 
Lithuania  faces  challenges  at  national  level 
in  its  transition  to  a  circular  economy. 
Lithuania 
country-specific 
recommendation  in  2025  to  increase  resource 
productivity 
towards  a  circular 
economy  by  focusing  on  resource  efficiency  and 
the 
transformation  and  decarbonisation  of 
industrial production. With EUR 1.31 generated per 
in  2024,  resource 
kg  of  material  consumed 
productivity in Lithuania is less than half of the EU 
average  of  EUR 3  per  kg and  is  the  fourth  lowest 
in the EU. Furthermore, at 34.7%, import material 
dependency  in  Lithuania  was  substantially  higher 
than the EU average (22.4%) in 2024, although it 
had  dropped  from  41.4%  in  2018.  At  4.2%,  the 
circular material use rate in 2024 was roughly one 
third  of  the  EU  average  of  12.2%.  The  circular 
material use rate is stagnating and has been on a 

(149) As regards an annual fee, it  should be noted that a flat tax 
without  robust  social  safeguards  would  disproportionately 
penalise  lower-income  households  that  own  older  vehicles 
not by choice but through a lack of affordable second-hand 
alternatives. 

75 

-202468101214200520232024MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
  
 
 
downward trend since 2016. The recycling rate for 
construction  and  demolition  waste  was  slightly 
above  the  EU  average  of  79.72%,  at  81.26%  in 
2022. As for plastic packaging recycling, there was 
a drop from 71.5% in 2017 to 42.9% in 2023. 

its 

has 

successfully 

Lithuania 
reduced 
landfilling,  surpassing  the  EU  2035  target, 
increased. 
incineration  rate  has 
but 
Lithuania  has  been  very  successful  in  reducing 
landfilling, with only 5.6% of municipal waste sent 
to landfill in 2024, compared with the EU average 
of  21.3%.  This  marks  a  considerable  decrease 
from a landfill rate of 86% in 2010. Lithuania has 
already  overachieved  the  EU  target  of  limiting 
landfilling to a maximum of 10% by 2035. On the 
other  hand,  the  incineration  rate  has  more  than 
doubled since 2018 and stands at 38.7% in 2024, 
above  the  EU  average  of  26.1%.  Lithuania’s 
national  waste  prevention  and  management  plan 
for  2021-2027  includes  a  ceiling  for  incineration 
capacity,  stating 
incinerated 
municipal waste must not exceed 429 000 tonnes 
per year. The municipal waste recycling rate stood 
at  52.5%  in  2024,  above  the  EU  average  of 
48.1%. 

that,  by  2027, 

of 

Lithuania’s 

Implementation 
2023 
guidelines  for  the  transition  to  a  circular 
economy  by  2035  is  yet  to  bring  about  the 
necessary  systemic  change.  One  of 
the 
measures  under  the  Lithuanian  recovery  and 
resilience  plan  was  the  adoption  of  a  circular 
economy strategy in June 2023. Although it takes 
the  form  of  guidelines,  it  serves  as  a  mandatory 
action  plan  for  stakeholders  in  the  different 
sectors  contributing  to  the  circular  economy.  The 
goal is to create a fertile business environment for 
circular innovation and circular economy practices. 
Implementation is under way, but progress is slow. 
There has been a marginal 2% increase in circular 
economy  jobs  since  2014 (150),  with  the  sector 
accounting for 4.2% of total employment in 2023, 
which is above the EU average of 2%. 

and  plastics  subsector  registered  the  highest 
(17.0%  on  average 
in  value  added 
growth 
between 2018 and 2023) (151)(152). 

Overall  bioeconomy  employment  has  fallen 
slightly.  However,  the  bio-based  chemicals  and 
plastics  and  wood  products  and 
furniture 
subsectors  bucked that trend,  recording  growth  in 
total employment between 2018 and 2023 (0.4% 
and 15.1% on average respectively). 

Labour productivity in the bioeconomy – measured 
as  value  added  per  person  employed  –  stood  at 
65.8%  of  the  national  average  and  has  grown 
from 57.0% in 2018 (153). 

R&D  business  expenditure  from  bioeconomy 
subsectors  has  grown  by  more  than  the  overall 
R&D  business  expenditure  in  Lithuania  (14.4% 
compared  with  an  average  of  10.4%  between 
2018 and 2023) (154). 

Lithuania  is  rapidly  scaling  up  its  bio-based 
chemicals  and  plastics  market,  leveraging  a 
biotechnology  ecosystem  and  shifting  toward 
manufacturing  bio-based 
ingredients  such  as 
starch and proteins from local wheat. At the same 
time, bio-based textiles have been identified as an 
emerging  high-potential  niche  within  the  national 
strategy  to  move  towards  higher  value-added 
production.  These  efforts  are  central  to  the 
national  bioeconomy  strategy,  which  aims  to 
reduce exports of raw biomass and achieve a 5% 
GDP contribution from biotechnology by 2030 (155). 

Zero-pollution industry 

Air quality in Lithuania is of concern, notably 
in  the  capital.  Some  1 700  deaths  could  be 
attributed  to  air  pollution  in  the  form  of  fine 
particulate  matter  (PM2.5)  and  ozone  exposure 

Bioeconomy industry 

Between  2018  and  2023,  bioeconomy  value 
added  grew  by  7.4%  on  average,  which  is 
below  the  EU-27  average  of  5.1%.  Of  the 
bioeconomy  subsectors,  the  bio-based  chemicals 

(150)Eurostat, Persons employed in circular economy sectors, 

Link. 

(151) Joint Research Centre, Developments of Economic Growth 
and Employment in Bioeconomy Sectors across the EU, Link. 

(152) Bioeconomy subsectors: food and beverages; bio-based 
textiles; wood products and furniture; bio-based chemicals and 
plastics. 

(153) Ibid. 

(154) Joint Research Centre, Business expenditure in Research and 
Development (R&D) in the EU bioeconomy, Link,. 

(155) Bio-based Industries Consortium (BIC), Mapping Lithuania's 
Bio-based Potential (Brussels: BIC, 2020). 

76 

 
 
 
alone (156).  The  latest  available  annual  estimates 
for  2023  attribute  14 500  years  of  life  lost  (YLL) 
to  fine  particulate  matter  (PM2.5)  and  3 200 YLL 
to  ozone  exposure (157).  As  discussed  in  Annex  15 
on  health,  environmental  risks  also  weighed 
heavily  on  population  health.  The  combination  of 
behavioural  risks  (i.e.  smoking,  harmful  alcohol 
use,  poor  diet  and  low  physical  activity)  and  air 
pollution  accounted  for  32%  of  all  deaths  in 
Lithuania in 2021, which is slightly higher than the 
EU  average  of  29%,  underscoring  the  need  for 
stronger  and  more  comprehensive  public  health 
measures (158). 

combination 

The  solution  to  air  pollution  can  be  found 
through  a 
of  measures: 
(i) sustainable  transport,  energy  and  agricultural 
policies  to  reduce  emissions  of  air  pollutants; 
(ii) targeted  urban  and  land-use  planning  policies; 
and 
(removing 
fiscal 
environmentally  harmful  subsidies  and  increasing 
targeted environmental taxation). 

(iii) specific 

actions 

factors 

toxicity 

Water  pollution  from  industry  is  low  but 
increasing. Lithuania had the second lowest level 
of pollutant releases into water in the EU in 2022, 
with  0.07 kg/EUR 1 billion  GVA,  weighted  by 
human 
(EU  average:  0.86). 
Although  there  was  a  71%  decrease  in  industrial 
heavy  metal  releases  (cadmium,  mercury,  nickel 
and  lead)  between  2010  and  2022,  there  was  a 
57%  increase  in  total  nitrogen  releases  and  a 
360%  increase  in  total  phosphorus  releases,  as 
reported 
Emissions 
Directive (159).  In  Lithuania,  water  pollution  by 
industry  imposes  direct  and  indirect  costs  of 
EUR 54 million  annually (160),  not  yet  sufficiently 
borne by the polluters. 

Industrial 

under 

the 

(156) European Commission, 2025, State of Health in the EU: 
Lithuania – Country Health Profile 2025, p. 5, Link. 

(157)EEA, 2025, Harm to human health from air pollution in 

Europe: burden of disease status, 2025, Link. 

(158) European Commission, 2025, State of Health in the EU: 
Lithuania – Country Health Profile 2025, p. 5, Link. 

(159) EEA, Water pollutant releases changes from 2010 to 2022 

for the EU Member States, 2024, Link. 

(160) European Commission: Directorate-General for Environment, 
IEEP, Green taxation and other economic instruments – 
Internalising environmental costs to make the polluter pay 
(p. 48, Table 5), 2021. Link. 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A8.1: Key clean industry and climate mitigation indicators: Lithuania 

Sources and notes: Industry decarbonisation: All data are from Eurostat; data following the UNFCCC Common Reporting 
Format (CRF) are from the European Environment Agency (EEA), republished by Eurostat. (1) Sectors covered: all divisions of 
section C - Manufacturing - of the NACE Rev. 2 statistical classification of economic activities, except C19 (manufacture of coke 
and refined petroleum products). (2) GHG emissions as per UNFCCC Common Reporting Framework (CRF) categories 1.A.2 - fuel 
combustion in manufacturing in industries and construction (that broadly correspond to the broadly correspond to the NACE 
sections C - Manufacturing and E - Construction, excluding C-19),  and CRF2 - industrial processes and product use. The figures 
shows the emissions in the 1.A.2 category as a share of the sum of CRF1.A.2. and CRF2 emissions. (3) Sectors covered: CRF 1.A.2 
as described above. Gross value added (GVA) data in the denominator aligned in sectoral coverage, in 2020 prices. (4) Sectors 
covered: NACE section C excluding C19. (5) Nominator: NACE divisions C17, 20, 23, 24; denominator: NACE section C excluding 
C19 (see above). (6) GVA (denominator) in 2020 prices. Reduction of effort sharing emissions: Data source: European 
Environment Agency, greenhouse gas data viewer; European Commission, Climate Action Progress Report, 2025. For details, see 
the footnote in the "Reduction of effort sharing emissions" section. Sustainable road transport: (7) Source: Eurostat; (8) Source: 
European Alternative Fuels Observatory; (9) Source: Eurostat. For all climate mitigation indicators, the trend arrows compare the 
latest available data (year t) with the data four years earlier (t-4). Sustainable industry: Bioeconomy value added, employment 
and productivity: JRC, Developments of Economic Growth and Employment in Bioeconomy Sectors across the EU. Bioeconomy 
R&D business expenditure: JRC, Business expenditure in Research and Development (R&D) in the EU bioeconomy. Damage cost for 
industrial pollution: EEA, The costs to health and the environment from industrial air pollution in Europe, 2024. Water industrial 
pollutants releases: EEA, Industrial releases of pollutants to water and economic activity in the EU-27, 2024. Water chemical 
status: WISE, Surface water bodies: Chemical status, 2024 and WISE Groundwater bodies: chemical status, 2024. Other indicators: 
Eurostat. For circular economy indicators, the trend arrows compare the latest available data (year t) with the data two years 
earlier (t-2). 

78 

Climate mitigationTrendIndustry decarbonisation201820192020202120222023202420182023GHG emissions intensity of manufacturing production, g/€ (1)510520520450360--#VALUE!330-Share of energy-related emissions in industrial GHG emissions (2)30.629.729.131.735.034.7-55.557.9Energy-related GHG emissions intensity of manufacturing and construction, g/€ (3)168.0167.1150.6146.0132.5122.8-203.9163.0Share of electricity and renewables in final energy consumption in manufacturing, % (4)38.639.343.842.446.048.346.942.843.9Energy intensity of manufacturing, GWh/€ (4)1.661.611.451.421.151.111.181.271.05Share of energy-intensive industries in manufacturing production, % in GVA (5)---------GHG emissions intensity of production in sector [...], g/€ (6)- paper and paper products (NACE C17) 272          256          183                 178            144                  131           147             722             619            - chemicals and chemical products (NACE C20) 3 474       3 481       2 613              1 952         1 569               2 508        2 295          --- other non-metallic mineral products (NACE C23) 3 621       3 921       3 648              3 817         4 546               3 383        3 407          2 495          2 352         - basic metals (NACE C24) 220          330          69                   30              27                    41             24               2 842          3 099         Reduction of effort sharing emissions201820192020202120222023202420182023GHG emission reductions relative to base year, % 5.12.10.62.0- domestic road transport44.850.046.446.143.546.740.8-1.4-5.6- buildings9.23.6-3.19.67.81.540.7-20.3-33.520052021202220232024TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %13.113.713.313.113.3-21.0%-17.9%-21.2%Sustainable road transport2018201920202021202220232024202520182021New zero-emission vehicles, electricity motor, % (7)0.650.681.174.536.258.236.741.038.96Number of publicly accessible AC/DC charging points (8)--123127428131329474713446956n/aShare of electrified railways, % of total (9)7.987.987.987.987.947.928.1155.4756.49Sustainable industryTrendEU-27Circular economy transition20182019202020212022202320242018latest dataMaterial footprint, tonnes per person19.920.520.823.020.720.120.514.813.7Circular material use rate, %4.3            3.9           4.0                  4.1             4.0                    4.1             4.211.612.2Resource productivity, €/kg0.9            0.9           0.9                  1.0             1.2                    1.3             1.32.13.0Employees in circular economy4.2            4.34.3                  4.6             4.0                    4.2             -2.12.0Patents in circular economy01.5           -                  1.0             12.312.0Recycling rate           52.6           49.7                  45.3             44.3                   48.4            49.3 52.5            46.4048.1Plastic recyling 69%70%56%45%44%43%-41%42%Construction and demolition waste (CDW) recovery 99-988889Bioeconomy industry 2018201920202021202220232024CAGR 2018-202320182023Value added, million EUR3 3193 6194 1334 5845 9845 106-7.4%642 438863 436Employment, total number of people employed195 545185 266173 370173 984180 773170 903--2.2%17 649 04017 085 642ProductivityValued added per worker, thousand EUR17.019.523.826.333.129.9-9.9%36.450.5Valued added per worker, % of national average57.061.672.772.379.465.8--62.270.7R&D business expenditureTotal bioeconomy (biomass producing and converting sectors)26375457685914.4%15 67223 335Total R&D business expenditure178210265307354322-10.4%196 587259 525Zero pollution industry201820192020202120222023202420182021Damage cost for industrial pollution1.11.4-----414.9352.7Water industrial pollutants releases 2021change (2010)2021change (2010)2021change (2010)2021change (2010)-           no data-                  no data-                   no data-              no data Water chemical statusGood4                     Good (%)0.0                    Poor61.0Poor (%)5%EUTOCPhosporusLithuaniaLithuaniaCd, Hg, Ni, Pbnitrogen 
 
 
 
 
 
  
 
ANNEX 9: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  increasing 
energy  affordability,  while  advancing  the 
transition 
the 
implementation  of  past  energy-related  country 
specific recommendations. 

to  net  zero. 

reflects 

It 

the 

Lithuania’s  core  challenges  are  to  manage  the 
transmission  and 
bottlenecks  on  both 
distribution  grids,  arising  due 
the  quick 
development  of  renewables  in  the  country,  and 
decrease  its  import  reliance  by  confirming  this 
trend of renewables development, while adressing 
the  grid  stability  risks  arising  from  this  energy 
system transformation and the synchronisation to 
the European continental grid.  

to 

levies represent over 17% of household electricity 
bills and 20% of gas bills (87). 

in 

(70.6%) 

Because  it  had  a  significant  share  of  clean 
energy 
its  electricity  mix, 
Lithuania’s  wholesale  electricity  prices 
averaged EUR 89/MWh in 2025 (88) – slightly 
above  the  EU  average  of  EUR 85/MWh. 
Average  day-ahead  electricity  prices  in  Lithuania 
decreased slightly in 2025 amid rising natural gas 
costs (89). Fossil  fuels maintained their structural 
role  as  the  dominant,  and  costly,  marginal  price-
setting technology (48% of price-setting hours for 
29.4%  electricity  generation),  but  their  effect  on 
electricity  prices  was  mitigated  by  Lithuania’s 
growing penetration of renewables. 

Energy prices and costs 

Graph A9.1: Electricity and gas prices for household and non-
household consumers, first half of 2025 

the 

lower 

Alongside 
fiscal 
continued 
components  of  retail  energy  bills  compared 
to  EU  averages,  household  consumer  energy 
prices  in  Lithuania  decreased  and  remained 
below  EU  averages,  as  did  electricity 
industrial prices, whereas non-household gas 
prices have increased since 2024. 

at 

EUR 0.2109/kWh 

In  the  first  half  of  2025,  household 
in  Lithuania 
electricity  and  gas  prices 
decreased  and  remained  below  the  EU 
average, 
and 
EUR 0.0667/kWh  respectively.  Retail  electricity 
prices  for  industrial  consumers  (EUR 135/MWh) 
also  decreased  and  remained  below  the  EU 
average 
industrial  gas 
prices  increased  slightly  to  reach  EU  levels.  While 
is 
60%  of  the  electricity  price  for 
accounted for by the wholesale cost, network cost, 
carbon cost and taxes represent 32%, 8% and 0% 
respectively of the electricity bill. 

(EUR 164/MWh),  while 

industry 

Final  energy  prices  in  Lithuania  in  the  first 
half  of  2025  remained  unbalanced.  For  large 
businesses,  electricity  was  2.6 
times  more 
expensive than gas in the first half of 2025, while 
taxes and levies (excluding VAT) accounted for less 
than 1% of electricity bills and for 1% of gas bills. 
As  with  industrial  prices,  the  impact  of  taxes  and 
levies  on  the  electricity-to-gas  price  ratio  for 
household  consumers  does  not  demonstrate  any 
balancing effect, bearing in mind that all taxes and 

79 

(i) For household consumers, the consumption band is DC for 
electricity and D2 for gas. 
(ii) For non-household consumers, the consumption band is ID 
for electricity and I4 for gas. VAT and recoverable charges are 
not displayed for non-household consumers as these are 
typically recovered by businesses. This also applies to the ‘% 
of taxes and levies’, which is shown excluding VAT and 
recoverable charges for non-household consumers. 
(iii) ‘Without taxes and levies’ indicates the retail price 
excluding all taxes and levies. It always includes the 
energy/supply and network cost components, which are not 
disaggregated in Eurostat’s six-monthly price dataset. 
Source: Eurostat 

Although daytime prices have fallen in recent 
years,  Lithuania  remains  vulnerable  to  price 
spikes  during  peak-demand  hours.  This  is 
because  falling  solar  output  in  the  evening  and 
early  morning,  combined  with  limited  non-fossil 
flexibility,  leads  to  costly  ramp-ups  of  thermal 
plants  to  cover  supply–demand  gaps.  As  a  result, 
in  Lithuania  averaged 
price 
EUR 158/MWh  in  2025,  a  4%  increase  compared 
to 2024, and significantly above the EU average of 
EUR 121/MWh. 

spreads 

(90) 

 
 
 
 
 
Graph A9.2: Low-carbon electricity generation vs. electricity 
wholesale prices, 2025 

Unavailable data for Cyprus and Malta. Wholesale price is 
given as average of day-ahead electricity prices over 2025. 
EU-27 average is calculated as consumption-weighted. EU 
low-carbon share is calculated out of total EU electricity 
generation. Low-carbon share by country is calculated out of 
total public electricity generation. Low-carbon includes 
renewables and nuclear. 
Source: Eurostat 

Flexibility and electricity grids 

In  February  2025,  Lithuania,  alongside 
Estonia  and  Latvia,  disconnected  from  the 
Russian-operated  IPS/UPS  electricity  system 
and  successfully  synchronised  with  the 
Continental  European  Synchronous  Area 
(CESA)  via  Poland.  The  synchronisation  with 
CESA  allows  the  three  Baltic  countries to manage 
their  electricity  systems,  ensuring  stable  and 
reliable  frequency  regulation,  thereby  increasing 
security 
energy 
throughout  the  region.  Lithuania  is  a  significant 
net  electricity 
its  own 
consumption),  exporting  some  volumes  to  Poland, 
while importing significant volumes from Sweden. 

independence  and 

(31%  of 

importer 

energy 

the 

LitPol 

21.45%.  Originally, 

The  EU  has  set  an  interconnection  target  of 
at least 15% by 2030. Nevertheless, because of 
this  transition,  Lithuania's  interconnectivity  level 
with  neighbouring  Member  States  has  decreased 
to 
Link 
interconnector  between  Lithuania  and  Poland 
trade, 
facilitated 
contributing  to  a  higher  interconnectivity  level. 
With  LitPol  Link’s  current  use  dedicated  to 
synchronisation,  the  amount  of  transfer  capacity 
available  for  trade  has  temporarily  decreased, 
from  500MW  to  approximately  150MW.  However, 
according  to  the  Lithuanian  authorities,  with 
implementation  of  additional  system  operation 

cross-border 

electricity 

80 

interest 

measures,  trade  capacity 
is  planned  to  be 
increased  gradually  to  previous  levels  by  2027. 
The  completion  of  the  second 
interconnector 
between  Lithuania  and  Poland  –  project  of 
common 
(PCI)  Harmony  Link  will 
significantly  increase  trade  capacities  and  up  to 
1200  MW.  The  completion  of  this  project,  as  well 
as  raising  the  existing  levels  of  interconnectivity 
with  Latvia  are  essential  aspects  in  increasing 
Additional 
interconnectivity. 
Lithuania’s 
interconnectors  could  be  considered,  such  as  a 
possible  offshore  interconnector  with  Germany 
(currently known as the Baltic Hub). 

renewable 

With  additional  infrastructure  developed  for 
synchronisation  such  as  battery  storage, 
Lithuania is also prioritising the development 
of 
enhanced 
energy. 
transmission  grids  are  now  better  equipped  to 
integrate  a  higher  share  of  renewables  in  overall 
electricity generation. Important challenges remain 
in  the  capacity  of  the  distribution  grids,  following 
the increase of prosumers in the country. 

The 

Lithuania  is  also  expanding  the  Kruonis 
pumped hydroelectric power plant (PCI No 4.7 
on  the  fifth  PCI  list)  by  adding  a  new  fifth 
unit,  delivering  110 MW  of  capacity  to  the 
market,  bringing  the  total  installed  capacity 
of  the  plant  to  about  1 010 MW  once  it  has 
been  completed  by  the  end  of  2026,  which 
equals  40%  of  the  peak  hourly  demand  in 
Lithuania  in  2025  at  2.5  GW.  This  additional 
unit will increase flexibility and storage capacity to 
better  manage  intermittent  renewable  generation 
from wind and solar. 

invested 

Considering  security  concerns  in  the  Baltic 
Sea  region,  Lithuania  is  taking  measures  to 
protect critical energy infrastructure against 
potential  cyberattacks  and  physical  attacks. 
In  2025,  Lithuania 
in  ensuring  the 
security,  reliability  and  stability  of  its  electricity 
system.  In  June,  Lithuania,  together  with  Estonia, 
Latvia  and  Poland,  signed  a  memorandum  of 
understanding to improve regional energy security, 
focusing  on  resilience  against  cyberthreats  and 
physical 
energy 
infrastructure, including subsea cables. 

threats 

hybrid 

and 

to 

Under  the  mid-term  review  of  cohesion 
policy, 
reallocated 
EUR 40 million 
investment  programme 
resources  to  increasing  the  resilience  of 

Lithuania 

has 

in 

 
 
energy  infrastructure,  replacing  substantial 
parts  of  underground  power  line  cabling  in 
forested  areas  of  Lithuania  by  ensuring 
greater 
in  the 
infrastructure  protection 
event  of  hybrid  attacks  or  military 
operations. 

Besides  electricity  projects,  Lithuania 
is 
involved  in  two  other  PCIs  from  the  first 
Union list of projects of common interest and 
projects  of  mutual 
interest  addressing 
hydrogen 
(the  Nordic-Baltic  Hydrogen 
for 
Corridor).  These  projects  are  planned 
completion  by  the  end  of  2029  and  2030 
respectively and are expected to help decarbonise 
Lithuania’s  energy  system  and  integrate  more 
renewable energy. 

that 

Lithuania’s  permitting  process  works  well 
and  balances  regulatory  requirements  with 
practical implementation. The efficiency of the 
permitting  process  has  resulted  in  successful 
implementation  of  energy  projects 
led 
Lithuania  to  desynchronise  from  the  post-Soviet 
energy  system  in  2025.  Even  though  there  is  no 
specific 
the  permitting 
procedures  for  projects  of  common  interest  and 
projects of mutual interest, the Ministry of Energy 
engages  early  on  with  project  promoters  to 
streamline  coordination  and  make  sure  that  the 
projects  benefit  from  special  status  (project  of 
national  significance or project  of special  national 
significance).  This  shortens  specific  stages  of  the 
permitting procedure. 

legislation  governing 

Lithuania  faces  increasing  demands  for  grid 
connection  from  decentralised  renewable 
energy  sources  and  storage.  To  address  this, 
Lithuania is advancing network planning for future 
connection  capacity  needs  and  the  reduction  of 
integrated 
for  example 
bottlenecks 
scenario 
electricity, 
gas 
to 
consultations.  The  estimated 
connect  a  utility-scale  photovoltaic  system,  as 
reported by the industry, ranges between 9 and 36 
months, which is less than the EU average (around 
four years). 

through 
hydrogen 
time 

range 

and 

Lithuania’s  regulatory  framework  does  not 
present  barriers  to  the  development  of 
it  allows  new 
flexible 
stakeholders 
energy 
resources  to  access  day-ahead  and  intraday 
the  Lithuanian  national 
markets.  However, 

resources,  as 
and 

distributed 

lacks 

agency 

information 

regulatory 
on 
aggregation models, and the 80% target for smart 
metering devices for consumers has not yet been 
reached,  despite  encouraging  progress. Lithuania 
completed  the  first  phase  of  smart  meter 
deployment  by  end-2025,  with  1.3  million  next-
generation  meters  installed.  Smart  meters  now 
account  for  approximately  90%  of  distributed 
electricity volume, and are installed at 66% of all 
in  2023.  The  second 
customers,  from  58% 
deployment  phase,  covering 
low-
remaining 
consumption households, is under way from 2026. 

is  steadily 

improving.  Due 

Consumer  empowerment  in  the  electricity 
market 
to 
substantial  support  from  cohesion  policy  funds 
and  a  favourable  regulatory  framework,  the 
number  of  prosumers  continues  to  grow.  In  2025 
it  reached  170 000  (37%  increase  compared  to 
2024).  Overall,  53%  of  household  and  90%  of 
business  customers  use  smart  metering.  The 
meters 
installed  record  around  90%  of  the 
distributed volume of electricity. 

Flat-price 

low 
and 

in  Lithuania  have 
Household  consumers 
access  to  dynamic-price  contracts,  but  their 
(3%  of  all 
uptake  remains  very 
regulated-price 
contracts). 
contracts  remain  predominant  among  household 
consumers,  at  61%  of  all  contracts,  indicating  a 
consumer preference for stable pricing. The annual 
contract switching rate dropped to 4.14% in 2024 
after  peaking  at  18.6%  in  2022.  Lithuania  has 
developed  a  robust  legal  framework  for  energy 
communities,  with  dedicated  support  schemes.  As 
registered  energy 
a 
communities  has  increased  significantly,  with  23 
new communities registered in 2025 and the total 
number reaching 62. 

the  number  of 

result, 

In  2024,  electricity  accounted  for  16.5%  of 
Lithuania’s  final  energy  consumption,  below 
the EU average of 23.4%, and this share has 
in  the  past 
remained 
decade (161).  When 
it  comes  to  households, 
electricity  accounts  for  17.3%  of  final  energy 
consumption, while in industry it represents 31.1% 
(see  also  Annex  8).  For  the  transport  sector,  this 

largely  stagnant 

(161) CAGR (compound annual growth rate) of −0.19% between 
2015 and 2024 and minimum/maximum share of 16.4% 
and 17.1% respectively (source: Eurostat). 

81 

 
 
 
share remains negligible, at 0.5%. Further progress 
in electrification across sectors is required in order 
to  cost-effectively  decarbonise  the  economy  and 
bring 
renewable 
generation to consumers. 

the  benefits  of  affordable 

Renewables and long-term contracts 

In  2024,  the  share  of  renewables  in  final 
energy  consumption  –  calculated  using  the 
RED  methodology  –  was  35.4%,  among  the 
highest in the EU and significantly above the 
EU  average  of  25.2%.  Hydro  represented 
3.3%,  biomass  2%  and  solar  19.2%  of  the 
electricity  mix.  The  proportion  of  electricity 
generated  from  renewable  sources  was  70.6%  in 
2025,  above  the  overall  EU  share  of  47.5% (162), 
but a decrease of 2.1 percentage points compared 
to the previous year (72.7% in 2024). The largest 
renewable  generation  sources  were  wind  (51.1% 
generation), 
of 
(10.6%), 
biomass/combustible  renewable  fuels 
and hydropower (10.0%). 

electricity 

total 

Graph A9.3: Lithuania’s installed renewable capacity vs 
electricity generation mix 

Electricity mix is given as net electricity generation (gross 
electricity production minus consumption of power stations’ 
auxiliary services). Electricity produced in pumped hydro 
plants is excluded from total net electricity production, as it 
was previously counted as electricity produced from another 
source. 
“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Eurostat 

In  2025,  Lithuania’s  installed  renewables 
capacity  increased  significantly.  Putting  aside 
offshore wind, the country is on track to meet the 
ambitious targets that it has set for renewables in 

(162) Yearly electricity data, SHARES. 

82 

capacity 

its final updated national energy and climate plan. 
Installed  capacity  for  renewables  in  Lithuania 
represented  6,121  MW  in  2025,  a  significant 
increase of 30.4% compared to 2024 (4,694 MW). 
Installed 
for  wind  energy  grew 
significantly  to  2.5  GW  in 2025  (compared  to  1.8 
GW in 2024, +37.0%), whilst installed capacity for 
solar  also  grew  strongly  (+27.9%  compared  to 
2024),  reaching  3.3  GW.  There  are  no  significant 
changes expected in the installed capacity of other 
renewable energy source 

Renewables  accounted  for  52%  of  energy 
demand in heating and cooling, which is well 
above  the  EU  average  of  26.7%,  despite  a 
decrease  from  2024.  However,  renewables 
accounted  for  only  8.9%  of  energy  demand  in 
transport,  which  is  below  the  EU  average  of 
11.2%,  but  a  good  increase  compared  to  2023 
thanks to the uptake of biofuels. 

Lithuania  has  made  some  progress 
in 
speeding  up  renewable  energy  source  (RES) 
permitting,  and  related  provisions  from  the 
Renewable  Energy  Directive,  such  as  the 
renewables  acceleration  areas,  are  under 
way.  Further  steps  would  be  beneficial,  such  as 
the  streamlining  of  permitting  procedures  which 
are  still  split  between  different  administrative 
bodies. While  authorities help guide  developers to 
the  necessary  institutions  for  their  queries,  this 
does  not  reflect  the  one-stop-shop  approach  that 
is promoted as a best practice across EU Member 
States. There is also no flexibility for developers to 
update technology specifications after a permit is 
issued,  i.e.  a  developer  is  not  allowed  to  request 
changes  to  increase  the  capacity.  Furthermore, 
investments 
in  administrative  and  human 
resources  and  new  technologies  (e.g.  geospatial 
data  management)  would  be  useful  to  reduce 
future bottlenecks. 

full 

renewable  electricity 

Lithuania  has  ambitious  plans  to  build 
offshore  wind  parks  in  the  Baltic  Sea  to 
reach 
self-
sufficiency  by  2030  and  replace  imported 
power.  However,  these  projects  have  faced 
major hurdles and a lack of investor interest 
due  to  increased  costs.  In  2023,  Lithuania 
obtained  State  aid  approval  to  support  the 
development of 700 MW of offshore wind capacity 
with a 15-year contract for difference financed by 
EUR 193 million of public funding. After a delay in 
publication,  the  related  tender,  the  second  for 

 
 
 
offshore wind in Lithuania, was organised between 
June and October 2025. However, it was rightfully 
deemed  invalid  as  only  one  participant  applied, 
and  not  the  minimum  of  two.  It  is  likely  that  this 
will jeopardise the 2030 target of 1.4 GW offshore 
wind,  as  only  one  wind  farm  of  700 MW  is 
expected  to  become  operational  by  that  date 
(following the first tender of the country in 2023). 
The  government  has  yet  to  decide  if  it  will 
organise  another  offshore  tender.  Moreover,  the 
government  has  created  a  number  of  State  aid 
measures  and 
the 
development  of  renewable  energy  and  storage 
systems  in  particular.  A  state  loan  for  energy 
storage  systems  with  a  call  closing  on  the  1st  of 
March  2026  was  launched,  covering  batteries 
connected  to  renewable  energy  sources,  through 
ILTE  (ex.  INVEGA)  the  national  development  bank, 
and  stand-alone  storage  systems  for  public  and 
private  entities.  Subsidies  for  home  battery 
systems  and  solar  panels  also  exist  to  develop 
even  more  self-producing  consumers.  Households 
that  are  unable  to  install  solar  panels  can  have 
shares in subsidised solar parks. 

to  help  promote 

loans 

The  market  for  power  purchase  agreements 
(PPAs) in Lithuania is still nascent, with only 
three  existing  deals,  which  mostly  involve 
utilities.  In  2024,  only  one  deal  was  signed: 
Centrica  Energy,  Taaleri  Energia  and  Lords  LB 
Asset  Management  announced  the  signing  of  a 
PPA  for  two  wind  farms  with  a  total  installed 
capacity  of  136 MW.  The  increased  frequency  of 
negative  electricity  prices  and  the  limited  number 
of  large  energy  consumers  are  key  challenges  to 
developing the PPA market. 

Energy efficiency 

In  2024, 

Lithuania made limited progress in improving 
final  energy 
energy  efficiency. 
consumption  (FEC)  increased  by  5.1%,  compared 
with  2023,  to  5.6 Mtoe,  continuing  the  overall 
slight increase since 2019. FEC in 2024 was not in 
line with the trajectory to its expected contribution 
in 2030.  

While  FEC  has  decreased  substantially  in 
(by  12.2%  since  2019)  and 
industry 
moderately  in  transport  (by  3.5%),  it  has 
increased in the residential sector (by 3.8%) 
and  in  services  (by  1.4%).  The  increase  in 

residential  energy  consumption  reflects  persistent 
including  housing  stock 
structural  challenges, 
expansion  and  growing  floor  area,  which  have 
outweighed  efficiency  gains  from 
renovation 
measures. Lithuania’s policy response has focused 
on  scaling  up  building  renovation  through  a 
combination  of  grants  and  preferential  loans  (see 
Annex 16), reinforced by substantial Recovery and 
Resilience  Facility 
(RRF),  European  Regional 
Development Fund and Cohesion fund funding for 
energy  efficiency  renovations,  complemented  by 
energy-saving measures introduced in response to 
the  2022  energy  crisis  and  financial  incentives 
(e.g. 
supporting 
Modernisation 
vehicle 
purchase compensation).  

electrification 

Fund-backed 

transport 

electric 

Between  2019  and  2024,  residential  FEC 
increased  by  3.8%,  driven  mostly  by  the 
construction  of  new  dwellings  and  larger 
floor areas of  existing buildings.  The increase 
referred to above is not in line with the objectives 
set  in  Lithuania’s  2020  long-term  renovation 
strategy,  which  aimed  to  reduce  primary  energy 
consumption by 15% between 2020 and 2030. 

towards  an 

However,  Lithuania  submitted 
its  draft 
national building renovation plan,  indicating a 
clear  commitment  to  setting  up  a  predictable 
pathway 
energy-efficient  and 
decarbonised  building  stock,  which  currently 
final  energy 
accounts 
consumption,  and  therefore  acknowledging  the 
importance  of  the  sector 
increasing  the 
country’s energy security. 

for  40%  of 

total 

in 

final 

residential 

Heating  and  cooling  account  for  79%  of  the 
country’s 
energy 
consumption, with renewables supplying 54% 
of  the  total  energy  used  for  heating  and 
cooling  in  all  sectors.  There  are  approximately 
157 000  households  using  gas  for  heating 
purposes. Approximately 25 000 heat pumps were 
sold  in  2024,  taking  the  total  stock  of  installed 
heat pumps to around 170 000. 

in 
In  the  residential  sector,  electricity 
Lithuania  was  3.16  times  more  expensive 
than gas in the first half of 2025. This means 
that  end  users  save  energy  but  pay  more  if  they 
choose  a  heat  pump  for  heating.  Lithuania  needs 
to  further  develop  its  energy  renovation  support 
framework  in  order  to  reach  its  2030  target  for 
the  residential  sector.  The  programmes  planned 
the  renovation  of  both  multi-apartment 
for 

83 

 
buildings  and  detached  homes  as  part  of 
Lithuania’s [draft] social climate plan should allow 
significant 
improvements,  targeting  vulnerable 
households  in  particular.  Lithuania  estimates  that 
146 000 households face energy poverty   

Security of supply and diversification 

Lithuania  is  no  longer  importing  Russian 
natural gas since 2022. Natural gas demand in 
the country was reduced by 30% – well above the 
15%  EU  target  –  between  August  2022  and  July 
2024. Security of supply is still ensured by gas and 
electricity infrastructure. 

Between  2022  and  2024,  the  share  of 
renewables  in  Lithuania’s  energy  mix  rose 
from  28.5%  to  31.9%.  Oil  and  petroleum 
products  remained  the  dominant  source,  with 
44,8%%.  Natural  gas 
stalled 
remaining  at  19.1%.  Solid  fossil  fuels,  non-
renewable  waste  and  peat  continued  to  fall,  with 
solid  fossil  fuels  dropping  from  2.5%  to  1.2%, 
non-renewable waste from 1.4% to 1.1% and peat 
from 0.4% to 0.1%. 

consumption 

In  response to  rising  energy prices  following 
the  regional  crisis 
in  the  Middle  East, 
Lithuania  has  temporarily  (for  two  months) 
suspended  planned  diesel  excise  increases, 
saving  ~€0.06/litre,  and  released  state  oil 
reserves as part of the IEA collective action. 
Lithuania  is  also  preparing  liquidity  support  for 
businesses and farmers, a fuel price transparency 
tool,  and  legislative  changes  to  recycle  increased 
VAT revenues into price-reduction measures. 

Fossil fuel subsidies 

Lithuania  has  taken  no  measures to address 
the  2025  CSR  on  taking  action  to  phase  out 
in 
non-targeted 
particular  subsidies  for  heating.  In  2024, 
environmentally  harmful(163)  fossil  fuel  subsidies 

subsidies, 

fossil 

fuel 

(163) Explicit fossil fuel subsidies (e.g. direct transfers) and implicit 
fossil fuel subsidies (i.e. tax expenditures linked to forgone 
tax revenues that have an identifiable fiscal impact for the 

84 

without  a  planned  phase-out  before  2030 
represented 0.47%(164) of Lithuania’s GDP(165). The 
reduced excise tax on natural gas used for heating 
in  businesses  and  households,  reduced  excise  tax 
on gas oil for fishing and agriculture and reduced 
VAT  rate  for  heating  residential  spaces  remain  in 
place,  as  fossil  fuel  subsidies  without  a  planned 
phaseout  before  2030  which  do  not  specifically 
address,  in  a  targeted  way,  energy  poverty  or 
genuine  energy  security  concerns.  Additionally, 
rate(166) 
Lithuania’s  2023  effective 
averaged EUR 61.8 per tonne of CO₂, below the EU 
weighted mean of EUR 84.80(167). 

carbon 

central budget) that support fossil fuel energy production, 
transmission and/or consumption.  

(164) European Commission calculation based on underlying data 
from the Study on energy subsidies and other government 
interventions in the EU – 2025 edition, Enerdata.  

(165) 2024 gross domestic product at market prices, Eurostat. 

(166) The effective carbon rate is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

(167) OECD (2024), Pricing Greenhouse Gas Emissions 2024. 

 
 
 
 
 
ANNEX 10: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

requires 

substantial 

Lithuania  faces  significant  economic  risks 
from climate change and nature degradation. 
This 
cross-sectoral 
investment.  While  Lithuania  has  made  some 
progress  in  developing  resilience  and  adaptation 
policies  over  the  last  year,  a  lack  of  stable  and 
predictable  funding  at  both  the  national  and 
municipal  levels  impedes  investment  and  the 
systematic  uptake  of  these  measures;  support 
relies  heavily  on  EU  funding.  Lithuania  struggles 
with  water  pollution  and 
increasing  water 
leakages,  as  nature  degradation  poses  significant 
its  economy  and  competitiveness, 
threats  to 
necessitating  urgent  actions.  While  Lithuania 
progresses towards its 2030 carbon removal goals 
and  aims  to  reduce  agricultural  impacts  through 
food  policies,  drained  peatlands 
sustainable 
continue  to  significantly  contribute  to  greenhouse 
gas emissions. 

Climate adaptation and preparedness 

require 

Climate change poses risks to Lithuania that 
will 
cross-sectoral 
significant 
investment.  The  burnt  area  of  most  EU  Member 
States  is  multiple  times  larger  than  its  own 
average  between  2006-2024.  Nevertheless, 
Lithuania  is  amongst  one  of  the  Member  States 
with a much lower number of burnt areas this year 
compared  to  their  average.  In  addition,  between 
2022-2024,  heat-related  mortality  in  Lithuania 
was moderate in comparison to the rest of Europe 
(168). However, Lithuania is still exposed to climate 
increasing 
change 
number of warm days, more rainfall (169), and risk 
of flooding and windstorms (170). 

impacts,  most  notably  an 

A  recent  study  commissioned  by  DG  CLIMA 
estimates  (171)  that  Lithuania  will  need  to 

(168)  Janoš, et al., 2025, Heat-related mortality in Europe during 

2024 and health emergency forecasting to reduce 
preventable deaths, Link. 

(169)  EEA, 2024, European Climate Risk Assessment, Link. 

(170)  EIOPA, 2025, Dashboard on insurance protection for natural 

catastrophes, Link. 

(171)  European Commission, 2026,  

Assessment of EU and 

Member States adaptation investment needs, Table 25, 
Link. The study provides detailed estimates of adaptation 
investment needs at the level of the EU and individual 
Member States per type of measure. It relies on a common 
methodology that makes estimates comparable across the 
EU. Four accompanying methodological reports provide a 

85 

invest almost EUR 481 million per year up to 
2050  in  adaptation  measures:  first  and 
foremost in ecosystems restorations (around 
57% of the total), followed by infrastructure 
retrofitting  and  reinforcement  (around  20% 
of  the  total)  and  the  food  sector  (around 
15%  of  the  total).  As  a  share  of  GDP,  the 
proportion 
total  adaptation 
investment  needs  represents  around  0.5%,  just 
above the EU-27 average of 0.46%. 

Lithuania’s 

of 

Lithuania has made some important steps to 
its  climate  adaptation  and 
strengthen 
resilience framework, but steps remain to be 
taken  in  implementation.  In  2024,  Lithuania 
approved  its  national  climate  change  adaptation 
plan  for  2024-2030,  as  an  annex  to  its  updated 
national  energy  and  climate  plan.  The  adaptation 
plan  complements 
the  pre-existing  national 
adaptation  strategy,  approved  in  2021.  A  total  of 
EUR 2 263  billion  has  been  allocated  for  the 
implementation  of  climate  adaptation  measures 
under  the  plan.  In  addition,  studies  identifying 
sectoral  and  municipal  vulnerabilities  to  climate 
change impacts have been carried out (172). 

Lithuania is also currently preparing an Adaptation 
to  Climate  Change  Law  (173),  which  will  create  a 
legal  basis  for  creating  and  implementing  a 
national  adaptation  policy,  formalise  providing 
adaptation-relevant 
information,  and  provide 
requirements  for  sectoral  adaptation  planning 
documents,  which  was  not  previously  included  in 
existing legal/policy frameworks/regulations. 

At  the  municipal  level,  eight  of  the  60 
municipalities  have  prepared  municipal 
climate  change  adaptation  plans  to  date,  as 
part  of  the  Ministry  of  Environment’s 
ClimAdapt-LT  project  (174).  The  municipal  plans 
of  another  eight  of 
the  most  vulnerable 
municipalities  are  also  being  worked  on.  The 
Adaptation  to  Climate  Change  Law  will  also 

detailed description of how the results were estimated to 
ensure full transparency. 

(172)  Climate-ADAPT Country Profile, 2025, Link. 

(173)  Publications office of the European Union, 2025, Climate 

Action Progress Report, Link. 

(174)  Climate-ADAPT Country Profile, 2025, Link. EEA and Norway 

Grants, 2026, Link. 

 
 
 
 
 
 
 
formalise  the  role  of  municipalities  and  oblige 
them to prepare municipal adaptation plans. 

and  mainstream 

The  Ministry  of  Environment’s  2022-2030 
development programme provides a framework to 
environmental 
strengthen 
protection  and  climate  change  management.  The 
programme 
objectives, 
progress  measures  and  concrete  monitoring 
indicators.  

identifies 

strategic 

In  addition, 
the  share  of  Lithuania’s 
population  covered  by  EU  Covenant  of 
Mayors  signatories  has  increased  drastically 
in  recent  years,  from  4.66%  in  2022  to 
26.45% in 2024 (175). This is still below the EU-
27 level of 34.44%, however. In addition, none of 
these  signatories  have  submitted  a  sustainable 
energy and action plan (SECAP) on time (i.e. within 
two  years  of  their  initial  commitment  to  the  EU 
submitted  any 
Covenant),  nor  have 
monitoring 
recommended 
timeframe (i.e. at least two years after submission 
of their SECAP) (176). 

reports  within 

they 

the 

Climate  risks  have  a  direct  effect  on 
Lithuania’s economy, but insurance coverage 
remains low. Between 1980 and 2024, Lithuania 
recorded  EUR 2.97  billion 
losses 
caused  by  weather-related  and  climate-related 
extreme  events(177).  As  a  share  of  GDP,  average 
annual economic losses from natural catastrophes 
in  Lithuania  are  amongst  the  lowest  in  the  EEA 
(178). 

in  economic 

At  the  same  time,  standing  at  2%  Lithuania 
has  one  of  the  lowest  rates  of  insurance 
coverage  against  weather-  and  climate-
related  extreme  events  in  the  EU  between 
1980-2024 (EU-27: 19%) (179). As of 2024,  no 

national  insurance  scheme  is  in  place  (180)  which 
could help improve insurance coverage and reduce 
the  insurance  protection  gap  (181).  For  the  two 
highest  risks  (floods  and  windstorms)  it  is  not 
mandatory to have an insurance coverage, while in 
the  case  of  a  disaster  the  compensation  is  on  an 
ad hoc basis (182). Lithuania has nevertheless taken 
steps to integrate climate change impacts into its 
macroeconomic strategy, in particular by adopting 
amendments  to  the  Law  on  Fiscal  Governance 
which entered into force on 1 January 2026. These 
amendments 
that  a  government-
authorised  institution  must,  at  least  once  every 
three years and before the submission of the draft 
budget  law  to  the  Seimas  (Parliament),  prepare 
reports 
the  medium-term 
how 
consolidated  budget  policy  is  going  to  affect 
sustainable  and 
into 
account  climate-related  risks  to the  economy  and 
public finances (macro fiscal risks), as well as their 
distributional  and  environmental  impacts,  among 
others. 

inclusive  growth,  taking 

assessing 

provide 

Critical 
infrastructure,  and  particularly 
Lithuania’s  transport  network,  is  at  risk  due 
to  climate  change.  The  transport  vulnerability 
index of the TEN-T network to climate change has 
been assessed to be one of the highest in the EU. 
This is mainly driven by the lack of mainstreaming 
of the transport sector into the national adaptation 
strategy,  the  limited  extent  of  interoperability  on 
the  TEN-T,  and  the  limited  social  and  economic 
capacity to  respond  to  climate-related  disruptions 
(183).  As  for  the  energy  sector,  Lithuania  identifies 
a  moderate  climate  change  risk  to  the  sector  in 
the  long-term  in  its  national  climate  change 
adaptation plan. In particular, Lithuania identifies a 
moderate risk of damage to electricity  generation 
and  transmission  facilities  and  infrastructure,  and 
a  high  risk  of  change  in  heating  and  cooling 
demand  (184).  In  order  to  mitigate  some  of  these 

(175) European Commission, EU Covenant of Mayors, Link.. There 

are 18 local authorities that have signed the EU Covenant of 
Mayors in Lithuania.  

(176) European Commission, European Covenant of Mayors, Link. 

(177) EEA, 2024, Economic losses from weather- and climate-

related extremes in Europe, Link. 

(180) ECB and EIOPA, 2024, Towards a European system for 

natural catastrophe risk management, Link. 

(181) These type of schemes supplement private insurance cover 
for natural catastrophes by improving risk awareness and 
prevention, while increasing insurance capacity through more 
affordable (re)insurance. 

(178) ECB and EIOPA, 2024, Towards a European system for 

(182) EIOPA, 2025, Dashboard on insurance protection for natural 

natural catastrophe risk management, Chart 2, Link. This 
figure includes earthquakes which happened in the period 
2020-2023. 

(179) EEA, 2024, Economic losses from weather- and climate-

related extremes in Europe, Link. 

catastrophes, Link. 

(183) Publications Office of the European Union, 2024, Support 

study on the climate adaptation and cross-border 
investment needs to realise the TEN-T network, Link. 

(184) European Commission, 2024, Lithuania - Final updated NECP 

2021-2030, Link. 

86 

 
 
 
 
 
 
 
risks,  Lithuania 
implementing  a 
is  currently 
EUR 160  million  project  to  replace  above-ground 
power  lines  with  underground  cables,  particularly 
in  forested  areas.  Lithuania  aims  to  replace 
2 000 km  of  cables  by  2028,  which  represents 
around  30%  of  the  cabling  network.  Under  the 
national climate change adaptation plan, Lithuania 
has  allocated  EUR 612  million  to  adaptation 
measures for infrastructure, which represents 27% 
of the total allocation. 

There  is  scope  to  tap  into  nature-based 
solutions  more  widely  and  systematically. 
Nature-based solutions and prevention play  a key 
role  in  increasing  resilience.  In  Lithuania,  there  is 
some focus on the use of nature-based solutions. 
The  Ministry  of  Environment’s  2022-2030 
development  programme 
includes  a  Progress 
Measure  on 
‘Increasing  resilience  to  extreme 
hydrometeorological  events’,  which  provides  a 
framework  for  deploying  adaptation  actions, 
several  of  which  are  nature-based  or  incorporate 
ecosystem-based  elements.  For  example,  there  is 
work 
hydro-morphological 
on 
restoration of degraded river stretches, as well as 
coastal 
including  beach 
nourishment  in  Palanga  and  Šventoji,  and  coastal 
zone management along the Curonian Spit. 

resilience  measures 

underway 

electricity  cooling  and  manufacturing,  remains  a 
significant water consumer, despite an 8% decline 
in  abstraction  from  2018  to  2023,  comprising 
18%  of  water  abstraction  at  53 million  m3  in 
2023.  However, public  water  supply  is  the largest 
water  consumer,  accounting  for  47%  of  total 
abstraction (186). 

the 

contributing 

Water pollution remains a challenge, marked 
by  declining  ecological  status  and  a  sharp 
drop  in  the  number  of  surface  water  bodies 
with  good  chemical  status.  Lakes,  rivers  and 
coastal  waters  in  Lithuania  are  polluted,  with 
barely a third achieving good ecological status due 
to agricultural runoff, urban pollution, and nutrient 
flows 
Sea’s 
to 
eutrophication  (187).  The  assessment  of  the  third 
river basin management plan (2022-2027) reveals 
a  decline  in  the  ecological  status  of  Lithuania’s 
surface  water  bodies,  with  only  36.4%  achieving 
good  status,  largely  due  to  nutrient  pollution  and 
diffuse  agricultural  activities.  While  groundwater 
bodies  maintain  good  quantitative  and  chemical 
status,  the  confidence  level  in  assessments  has 
been  reduced  to  70%,  indicating  the  need  for 
improved  pollutant  monitoring  and  integration  of 
environmental considerations into sectoral policies. 

Baltic 

Despite 
these  measures,  nature-based 
solutions  are  still  not  widespread  and  are 
used mostly in pilot projects. It is expected that 
the  national  nature  restoration  plan,  which  is 
scheduled  for  completion  by  1 September  2026, 
will  help  to  formalise  the  role  of  nature-based 
solutions in climate adaptation. 

Water resilience 

Water productivity in Lithuania  (185) stood at 
EUR 141 per m³ of abstracted water in 2023, 
below the EU-27 average of EUR 153 per m³. 
Lithuania’s  water  productivity 
is  showing  an 
increasing  trend  since  2020,  with  the  Water 
Exploitation  Index  Plus  (WEI+)  at  0.4  in  2022,  a 
consistently  low  value  quarterly  ranging  between 
0.1  and  1.7  since  2016.  Agriculture,  alongside 

(185) Water productivity is a metric that is calculated by dividing GDP 
(in chain-linked volume) by total water abstraction. It indicates 
the average economic value (GDP) a Member State creates for 
each unit of water it takes from nature. 

The Ministry of the Environment is preparing 
national  water  plans  to 
improve  water 
quality  across  the  country.  The  ten-year 
integrated  Water  project,  valued  at 
strategic 
EUR 19.7  million  and  funded  by  the  European 
Union’s  LIFE  programme,  will  be  instrumental  in 
implementing these plans (188). 

Lithuania  is  facing  increasing  water  leakage 
and  a  significant  financing  gap  in  pollution 
protection  and  water  management.  In  2023, 
leakage  data  revealed  a  total  of  23 220  million 
cubic  metres,  marking  an  increase  from  2022, 
where  the  reported  figure  was  21 792  million 
(189).  This  growing  challenge 
cubic  metres 
investment 
underscores  Lithuania’s  significant 
needs in water protection and management, where 

(186)EEA, 2025, Water abstraction by source and economic sector 
in Europe. Link. 

(187) Lithuania - Environment - European Commission. 

(188) Integrated water management in Lithuania (LIFE SIP Water) - 

Environmental Project Management Agency. 

(189) OECD, 2025 Lithuania Water Losses: Leakage | Economic 

Indicators | CEIC. 

87 

 
 
 
force 

the  financing  gap  is  EUR 259  million.  Increasing 
investment  will  be  even  more  important,  as  the 
Urban  Wastewater  Treatment  Directive  was 
revised  and  strengthened  in  2024  (190).  It  entered 
into 
Further 
infrastructure  development  would  help  improve 
water  management,  water  reuse,  and  the  general 
water  supply.  Additional  investments  are  needed 
to  improve  monitoring  and  support  nature-based 
solutions, flood prevention and river restoration. 

on  1 January  2025. 

Lithuania  has  a  high  compliance  rate  with 
the Urban Wastewater Treatment Directive – 
99.5% in 2022. In Lithuania, urban wastewater is 
treated in 61 plants across the country before it is 
discharged  (191).  Overall, 99.5%  of  the  urban 
wastewater in Lithuania is treated according to the 
requirements of the UWWTD. This is above the EU 
average of 75.9%. 

Lithuania  has  yet  to  fully  utilise  tools  for 
enhancing  water  resilience  practices. 
In 
wastewater  management,  the  recent  economic 
analysis  (192)  suggests  that  a  water  effluent  tax 
could  generate  EUR 57.9  million  annually.  Where 
pressures  on  water  abstraction  vary  significantly 
across  catchments,  tailoring  charges  to  local 
scarcity conditions can sharpen incentives without 
creating unnecessary burdens at national level.  

Nature restoration 

the 

economy 

country’s 

Nature  degradation  creates  significant  risks 
and 
to 
competitiveness.  Lithuania  has  a  higher-than-
average  supply  chain  dependency  on  ecosystem 
services  of  25%  of  its  gross  value  added  (EU 
average:  22%)  (193).  Overall,  41%  of  Lithuania’s 
economy 
is  highly  dependent  on  ecosystem 
services  to  produce  its  gross  value  added  (EU 
average: 44%). Several sectors such as agriculture, 

(190) Directive - EU - 2024/3019 - EN - EUR-Lex. 

fishery,  mining, 

forestry, 
construction  and 
healthcare have 100% of their gross value added 
directly  dependent  on  ecosystem  services.  It  is 
estimated  that  the  annual  costs  and  benefits  of 
ecosystem 
in 
Lithuania are EUR 80.3 million and EUR 1.1 billion, 
respectively (194). 

restoration  and  maintenance 

Action  on  nature  protection  and  restoration 
is  needed  to  meet  the  goal  of  EU  goal  30% 
by  2030.  Including  both  Natura  2000  and  other 
nationally  designated  protected  areas,  Lithuania 
legally  protects  17.9%  of  its  land  (EU  average: 
26.4%)  and  22.8%  of  marine  areas  (EU  average: 
12.3%). Targeted investment under the Lithuanian 
RRP  in  the  amount  of  EUR  2  million  for  the 
acquisition  of  privately-owned,  biodiversity-rich 
forest  land  will  contribute  to  nature  protection 
goals. Lithuania needs to restore up to 4 576 km2 
of  the  land  habitats  listed  in  Annex  I  to  the 
Habitats  Directive,  corresponding  to  up  to  7%  of 
its  land  (195).  According  to  the  latest  available 
assessments,  only  22.2%  of  habitats  and  36.7% 
of  species  have  a  good  conservation  status.  The 
mean forest condition index was 0.59 in 2018 (196). 
Furthermore,  Lithuania’s  common  farmland  bird 
index  stood  at  47.62  in  2023,  the  lowest  in  the 
EU-27.  According  to  the  latest  national  data, 
Lithuania’s  farmland  bird  index  slightly  increased 
to 48.94 in 2024, before declining again to 46.7 in 
2025(197). 

Nature  degradation  is  further  amplified  by 
invasive  alien  species,  with  18  recorded  in 
Lithuania  in  2024  (198),  inflicting  estimated 
damages  of  EUR 80  million  up  between 
1960-2020, 
affecting 
agriculture(199).  Eutrophication  –  a  threat  to 

primarily 

(194) European Commission: Directorate-General for Environment, 
IEEP, IUCN, Trinomics and UNEP-WCMC, Impact assessment 
study to support the development of legally binding EU 
nature restoration targets – Final report, Table 6-11, p. 85, 
Link. 

(195) European 

Commission, 

assessment 
accompanying  the  proposal  for  a  Regulation  on  nature 
restoration, Link. 

Impact 

2022, 

(191) Lithuania | Country profiles on urban waste water treatment | 

(196) On a scale from 0 to 1, where 0 represents a degraded 

WISE Freshwater, 

(192) RPA Europe, 2026 Conduct in-depth assessments on 
environmental priorities to support the greening of the 
European Semester and integration of environmental 
priorities into the EU’s economic governance framework, Link. 

(193) Dataset from Commission/JRC, based on Hirschbuehl et al., 
2025, The EU economy’s dependency on nature, Link. 

ecosystem and 1 represents a reference condition based on 
primary or protected forests. 

(197)AKPPI II tarpine ataskaita 2026-03-04 galutine.pdf 

(198) European Commission, 2025, Environmental Implementation 

Review, Lithuania Country Report, Link. 

(199) NeoBiota, Economic Cost of invasive alien species across 

Europe, 2021, Link, and European Commission: EMRC, Logika 

88 

 
 
 
 
the 

results  of 

biodiversity  and  ecosystem  integrity  –  has 
shown small improvement, with the areas at 
risk  declining  from  99.5%  to  97.8%  since 
2005  (200).  However,  Lithuania  as  one  of  the 
is  facing  a  significant 
Baltic  Sea  countries 
environmental  issue  caused  by  excessive  nutrient 
inputs.  The 
third  HELCOM 
assessment  show  little  or  no  improvement  in  the 
state of the Baltic Sea environment in 2016-2021. 
The  poor  environmental  status  of  the  Baltic  Sea 
clearly  affects,  for  example,  the  profitability  of 
fisheries and tourism, and impacts a wide range of 
ecosystem  services.  Considering  the  high  costs  of 
inaction, achieving a healthy Baltic Sea is also an 
investment 
in  the  sustainable  economic  and 
societal development of the region. Achieving good 
environmental status in national marine waters by 
2040  has  been  estimated  to  be  worth  5.6  billion 
euro per year to the people around the Baltic Sea 
(201). 

Sustainable agriculture and land use 

Lithuania is on track to meet its 2030 target 
for  land  use,  land-use  change  and  forestry 
(LULUCF).  To  meet  its  2030  LULUCF  target, 
additional  carbon  removals  of  -0.7  million  tonnes 
of  CO2  equivalent  (CO2eq)  are  needed  (202).  The 
latest  available  projections  show  a  surplus  of 
around 0.42 MtCO2-eq to the estimated 2030 net 
removal 
further 
investments in healthy forests and soils are key to 
building  resilient  biobased  product  value  chains 
competitive  EU 
and  enabling  a  growing, 
bioeconomy.  Continued 
the 
monitoring  system  of  net  removal  data  and 
projections will be crucial in supporting timely and 
effective action in the sector. 

(203).  Nonetheless, 

improvements 

target 

in 

However,  drained  peatlands  are  an  ongoing 
issue  and  contribute  to  GHG  emissions. 

Group and RPA Europe, Update of the costs of not 
implementing EU environmental law, 2025, Link, p. 62. 

(200) EEA 2024, Eutrophication caused by atmospheric nitrogen 

deposition in Europe, Link. 

(201) State-of-the-Baltic-Sea-2023-in-brief-final-2.pdf 

(202) National LULUCF targets of the Member States in line with 

Regulation (EU) 2023/839, Link.  

(203) Publications office of the European Union, 2025, Climate 

Action Progress Report, Link. 

Around 70% of peatlands in Lithuania are drained 
for  forestry,  agriculture  and  peat  extraction  (204). 
While Lithuania is investing in peatland restoration 
as  part  of  the  LIFE  programme  in  particular, 
including the now-completed multi-country project 
called  ‘Peat  Restore’  (205)  as  well  as  the  ongoing 
project ’Forest Habitat LT’ (206), more recent efforts 
to  rewet  peatland  areas  under  the  Recovery  and 
Resilience  Facility  have  been  less  successful  (207). 
the  economic  viability  of 
Issues 
restoration  projects  are  hindering  their  successful 
implementation,  particularly  when  these  projects 
target  agricultural  land.  Despite  these  initiatives, 
projects  to  rewet  drained  peatlands  in  Lithuania 
are  generally  pilot  projects  and  are  not 
systematically implemented at the national level. 

linked 

to 

is 

Lithuania 
towards  a 
transitioning 
sustainable food system by enacting policies 
aimed  at  minimising  the  environmental 
impact  of  agriculture.  Organic  farming,  which 
reduces  the  use  of  synthetic  fertilisers  and 
pesticides,  made  up  8.77%  of  Lithuania’s 
agricultural land in 2024, close to the EU average. 
Under  its  CAP  strategic  plan,  Lithuania  allocates 
approximately EUR 265 million to organic farming 
and  aims  to  increase  the  area  under  organic 
farming  very  slightly  –  from  8.92%  in  2023  to 
reach  9.75%  of  the  utilised  agricultural  area  by 
2027.    To  mitigate  the  environmental  impacts  of 
agriculture,  over  EUR 1.15  billion  of  the  CAP 
strategic plan’s EU funds budget is earmarked for 
measures 
the 
environment.  To  this  end,  Lithuania  has  designed 
several  agri-environmental  interventions  and  nine 
eco-schemes  that  compensate  farmers  for  the 
additional costs and income loss deriving from the 
adoption  of  more  environmental  and  climate-
friendly  practices.  These  include  reduced  use  of 
fertilisers  and  pesticides,  farming  techniques  that 
protect biodiversity,  and practices that reduce soil 
erosion or improve soil quality. 

the  climate  and 

to  support 

(204) United Nations Environment Programme, 2024, The Global 

Peatland Hotspot Atlas, Link. 

(205) The LIFE Peat Restore project ran between 2016 and 2022 

across five Member States (Lithuania, Latvia, Estonia, Poland 
and Germany). In Lithuania, 465 hectares of peatland were 
restored. See more information here: Link. 

(206) Link. 

(207) As part of the Recovery and Resilience Facility, it was 

planned to rewet at least 6 000 hectares of peatland area. 
However, the project could not be completed under the RRF 
due to objective circumstances, namely that the project did 
not attract any applicants. 

89 

 
 
 
The  utilised  agricultural  area  (UAA)  in  Lithuania 
slightly  decreased  from  2 947  thousand  hectares 
in 2018 to 2 872 thousand in 2023. 

There  has  been  some  improvement  in  the 
overall  nitrogen  balance,  with  a  drop  from 
25 kg of nitrogen per hectare of UAA in 2015 
to 22.8 kg in 2023. The livestock density index in 
Lithuania  was  0.23  in  2023,  well  below  the  EU 
average of 0.75 

In  2022,  the  level  of  pesticides  in  surface 
water  was  6%  in  rivers,  0%  in  lakes,  and 
17% on groundwater that exceed thresholds. 
Pesticides  not  only  threaten  aquatic  ecosystems 
and  related  socio-economic  activities  (such  as 
fisheries and coastal tourism) but also pose long-
term risks to human health through contaminated 
drinking water and food chains. 

90 

 
 
 
 
Table A10.1:  Key Adaptation Indicators 

(1)  EFFIS (European Forest Fire Information System). Link. 
(2) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters, based on 
modelling of the risk from floods, wildfires, windstorms, and the insurance penetration rate. Scale: 0 (no protection gap) – 4 (very 
high gap). EIOPA, 2025, Dashboard on insurance protection gap for natural catastrophes. 
(3) Measures total water consumption as a percentage of the renewable freshwater resources available for a given territory and 
period. Values above 20 % are generally considered to be a sign of water scarcity, while values equal or greater than 40 % 
indicate situations of severe water scarcity. 
(4) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on 
the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin 
Management Plans and Second Flood Risk Management Plans). 
(5) Indicator refers to concentrations of nitrate (NO3) in groundwater, measured as milligrams per litre (mg NO3/L). Nitrate can 
persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources (mainly 
agriculture). The EU drinking water standard is limited to 50 mg NO3/L to avoid threats to human health. 
(6) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2025 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA, JRC 

91 

Climate adaptation and preparedness:EU-27201920202021202220232024latest dataDrought impact on ecosystems50.243.392.080.0232.04-2.76[area impacted by drought as % of total]Forest fires burned area (1)236          43            -          -          305          -           354 510     [burned area in ha. per year]Economic losses from extreme events-          -          -          1              482          10            40 452       [EUR million at constant 2022 prices]Insurance protection gap (2)---1              1              1               -[composite score between 0 and 4]Sub-national climate adaptation action1              1              1              5              24            26            34               [% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:EU-27201920202021202220232024latest dataWater Exploitation Index Plus, WEI+ (3)0.50         0.86         0.64         0.40         0.41         -4.53            [total water consumption as % of renewable freshwater resources]Water productivity142          100          121          146          141          -151[EUR per m3]Water abstractionWater abstraction by source (% from surface water)42.24%59.76%53.18%44.45%46.68%-Water abstraction by sectorAgricultureElectricity coolingManufactu-ringPublic water supplyMining and QuarryingConstru- ction 18.18%19.51%8.33%47.57%6.41%0.00%Status of water bodies (4)[% of water bodies in a good status]Surface water bodies (ecological)-----36%38%Groundwater bodies (quantitative)-----100%93%Nature restoration:EU-27201920202021202220232024latest dataEcosystem dependency---41%--44%[% of direct dependency]Protected area17.117.217.417.817.926.4[% of terrestrial protected areas]Invasive alien species (IAS)-----1829.2[number of IAS of Union concern]Damage cost of IAS----0.081.69[EUR billion]Eutrophication 314314295[AAE of area at risk of euthrophication]Sustainable agriculture and land use:EU-272012-20182018-2021latest dataYearly net land taken by Member State828          1 718       670            [ppm of total urban surface per Member State]Land conversion in functional urban area [% of total land taken from 2018-2021]Arable land22%Complex and mixed cultivation0%Forests5%Herbaceous vegetation associations4%Open spaces with little or no vegetation0%Pastures69%Permanent crops0%Water0%Wetlands0%201920202021202220232024latest dataNitrates in groundwater (5)5.75.95.95.85.7[mgNO₃/l]Livestock density0.25:0.75(number of livestock units per hectare of utilised agricultural area)Ammonia emissions 95%95%95%95%95%-94%[% of total utilised agricultural area]Pesticide contamination on rivers and lakes water bodiesrivers6%27%[% of monitoring sites with pesticides exceeding thresholds, 2018-2023]lakes0%18%Pesticide contamination in soil 52%57%[% of samples with a concentration over 0.5 mg/Kg⁻¹]Net greenhouse gas removals from LULUCF (6)-5111.7-5172.0-5411.5-5824.5-5254.7--198 421 [ktCO₂-eq] 
 
      
 
FAIRNESS 
ANNEX 11: LABOUR MARKET 

but 

structural 

trap,  stark 

Lithuania’s labour market has shown signs of 
recovery, 
challenges 
increasingly  weigh  on  productivity  and 
competitiveness. Challenges include weaknesses 
in  the  active  labour market  policy  (ALMP)  system, 
a  high  unemployment 
regional 
differences and low labour market participation of 
young  people  and  persons  with  disabilities. 
Adverse  demographic 
to 
exacerbate  these  challenges.  As  Lithuania  works 
towards  its  2030  employment  target,  it  will  be 
crucial 
the  potential  of  under-
represented  groups,  people  outside  the  labour 
force  and  migrants,  address  regional  disparities 
and increase labour productivity. For Lithuania, the 
2025 
recommendations 
highlighted labour market challenges, in particular 
the need to increase the coverage of active labour 
including  by  strengthening 
market  policies, 
participation incentives. 

country-specific 

trends  are 

to  unlock 

likely 

Graph A11.1: Key labour market indicators 

Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, lfsi_neet_a, 
une_ltu_a] 

Despite strong employment and participation 
outcomes,  Lithuania  continues  to  face  high 
unemployment,  exacerbated  by 
regional 
disparities.  The  employment  rate  increased  for 
the second consecutive year to 80% in 2025, well 
above the EU average of 76.2% and within reach 
of the national  2030 employment target (80.7%). 
Labour  force  (20-64)  participation  increased  for 
the  fourth  consecutive  year,  reaching  85.9%  (EU: 

92 

80.8%)  but  adding  just  2  000  people  in  2025, 
compared  with  22 000  in  2024.  After  rising  to 
7.1% in 2024, the unemployment rate declined to 
6.9% in 2025, still significantly higher than in 6% 
in  the  EU.    Furthermore,  in  2025,  unemployment 
remained  particularly  high  outside  the  capital 
region (7.8% vs 5.1% in the capital region), in rural 
areas (8.4% vs 5.3% in the EU) and in towns and 
suburbs  (8%  vs  5.6%  in  the  EU),  compared  with 
the  relatively  lower  levels  in  cities  (5.4%  vs  EU 
6.8%).  Some  counties,  also  due  to  Lithuania’s 
location  at  the  EU’s  eastern  border,  experience 
particularly  high  unemployment  –  for  example,  in 
Alytus  and  Utena  counties,  it  was  respectively 
15.7% and 14.4% in 2025 (see Annex 18).  

the  EU).  ALMP 

Low  coverage  of  ALMP  measures,  together 
with  a  high  unemployment  trap,  hinders  the 
integration  of  unemployed  people  into  the 
labour  market.  The  unemployment  trap  remains 
among  the  highest  in  the  EU  (at  102%  vs  EU: 
74.4% in 2024), which hampers efforts to reduce 
the unemployment rate. Furthermore, participation 
in ALMP measures remains very low: only 6.7% of 
people  wanting  to  work  took  part  in  regular 
activation  measures  in  2023  (EU:  48.8%) (208).  A 
key  constraint  is  insufficient  public  spending  on 
ALMP measures (0.13% of GDP in 2023 vs 0.51% 
in 
financing  has  become 
increasingly  dependent  on  EU  funds  (European 
Social  Fund  Plus  (ESF+)  and  the  Recovery  and 
Resilience  Facility  (RRF)).  In  2024,  the  ESF+  and 
the RRF together accounted for more than 73% of 
in 
total  ALMP  funding,  compared  with  53% 
2023 (209). These factors limit Lithuania’s capacity 
to  support  unemployed  people,  including  those 
who are long-term unemployed, in entering or re-
long-term 
entering 
unemployment  rate  rose  to  2.5%  in  2025  (EU: 
1.9%),  after  hovering  at  2.3% 
three 
consecutive  years,  underscoring  the  need  to 
labour  market 
improve  the  capacity  of  the 
activation framework. 

labour  market.  The 

the 

for 

(208) Number of participants in regular activation measures 

(categories 2-7) in relation to persons wanting to work (%) - 
European Commission - Directorate-General for Employment, 
Social Affairs and Inclusion. 

(209) European Centre of Expertise (ECE) in the field of 

employment and labour market policies - ad hoc report on 
ALMPs. 

79808182838485868705101520252016201720182019202020212022202320242025%%% Activity rate 20-64 (rhs)% Unemployment rate 15-74 (lhs)% Long-term unemployment rate 15-74 (lhs)% Youth unemployment rate 15-24 (lhs)% NEET rate 15-29 (lhs) 
 
 
   
 
 
 
Young  people’s  transition  from  education  to 
employment  remains  problematic.  Although 
youth  (15-24)  unemployment  rate  dropped  to 
14.1%  in  2025  (EU:  15.2%),  difficulties  faced  by 
young  people  in  transitioning  to  high-quality, 
stable employment are underscored by high share 
of  young  people  neither  in  employment  nor  in 
education and training (NEETs, 12.4% vs 10.9% in 
the  EU  in  2025).  The  share  of  inactive  NEETs 
stayed  high  in  2025  7.9%  (vs  6.7%  in  the  EU). 
Furthermore, the shares of NEETs aged 15-19 and 
20-24  remained  the  largest,  suggesting  a  likely 
correlation  with  the  growth  of  share  of  early 
leavers from education and training during 2023-
2024 (see Annex 13). The share of NEETs in rural 
areas  (15.4%)  was  substantially  higher  than  in 
cities  (9.9%)  and  towns  and  suburbs  (12.7%)  in 
2025. Structural challenges also play a role in the 
high  NEET 
job 
opportunities  (especially  in  rural  areas,  see  Annex 
18), skills mismatches and inadequate support for 
transitions from education to work. 

rate.  These 

include 

limited 

Persons with disabilities still face significant 
barriers  to  labour  market  integration.  The 
disability  employment  gap  increased  significantly, 
from 32.4 pps in 2023 to 39.9 pps in 2024 (EU: 24 
pps)  and  42.8  pps  in  2025,  although  national 
administrative data (based on registered disability) 
do  not  indicate  any  deterioration.  At  the  same 
time, national  data point to very low employment 
levels  of  persons  with  disabilities:  30.8%  of 
working-age 
(16-64)  persons  with  registered 
disabilities were employed in 2024 (210). Barriers to 
participation  are  complex  and  start  early  in  life. 
Persons  with  disabilities  record  the  highest  rates 
of  early  leaving  from  education  and  training 
(25.3% vs 19.1% in the EU) (211) and NEET (30.3% 
vs  28%  in  the  EU) (212)  in  2023,  hindering  their 
labour  force 
integration.  Their 
labour  market 
participation  is  relatively  high  among  those  with 
tertiary education – 75.4% in 2024 (EU: 75.8%) – 
but  drops  significantly  at 
levels  of 
educational  attainment.  Only  about  10%  of 

lower 

(210) Data from the Board of State Social Insurance Fund. 

(211) EU-SILC 2023 (release 2024 v1), expert calculation, the 
number of observations of people with disabilities in the 
sample was less than 50, hence the mean value of 2022-
2023 was used.   

(212) EU-SILC 2023 (release 2024 v1), expert calculation, the 

number of observations for persons with disabilities in the 
sample is lower than 100, NEETs age group 16-29, both 
some and severe disability. 

working-age  persons  with  disabilities  contact  the 
public  employment  service  annually,  and  only 
about 5% of working-age persons with disabilities 
participated  in  ALMPs  in  2024.  Public  sector 
institutions  with  more  than  25  employees  must 
employ persons with disabilities in at least 5% of 
is  not 
their  positions.  However, 
sufficiently  enforced, 
the 
integration  of  persons  with  disabilities  into  the 
open labour market. 

this  quota 
further  hindering 

Lithuania  aims  to  address  the  challenges 
described  above,  but  more  efforts  are 
needed.  Despite  the  2025  recommendation  to 
increase  ALMP  coverage,  there  are  no  plans  to 
increase ALMP financing from the national budget. 
The RRF is ending in 2026 and the available ESF+ 
resources  are  being  exhausted.  As  a  result,  ALMP 
participation is expected to decrease substantially, 
from  almost  38  000  in  2024  to  ca  11  370  in 
2025 and 2026, underscoring the need for further 
efforts in this area. In 2025, the country reformed 
its  unemployment  benefit  system,  which  included 
aims  to  reduce  the  high  unemployment  trap. 
Nevertheless, it  remains to  be  seen if this  reform 
will achieve these aims: the EUROMOD simulation 
shows  that  the  positive  effect  for  lower  earners 
might  be  outweighed  by  the  increased  trap  for 
higher earners (213). The ESF+ continues to support 
young people’s access to employment through the 
Youth  Guarantee,  and  the  new  government’s 
programme includes commitments to continue this 
implementation.  To  encourage  more  persons  with 
disabilities  to  enter  the  labour  market,  since 
September  2024,  beneficiaries  can  keep  their 
social  assistance  disability  pension  if  they  find  a 
job.  In  addition,  in  2025,  Lithuania  expanded  the 
eligibility  for  these  benefits  to  people  who  have 
lost  45-55%  of  their  work  capacity  after  the  age 
of  24.  However,  further  efforts  are  needed  to 
reduce  high  share  of  NEETs  and  improve  the 
labour  market 
integration  of  persons  with 
disabilities. 

The  quality  of  jobs  is  improving,  driven  by 
fast  growth  of  wages.  The  prevalence  of  part-
time  and  temporary  employment  in  Lithuania  is 
one  of  the  lowest  in  the  EU,  including  among 
young 
female 
and  women, 
employment  rates  are  among  the  highest  (80.3% 

people 

and 

(213) Estimation performed by the European Commission, Joint 

Research Centre, based on the EUROMOD model vJ1.164+. 

93 

 
 
 
inflation  was  already 

vs  71.4%  in  the  EU  n  2025) (214).  The  gross 
minimum  wage  has  increased  significantly  in 
recent  years  –  from  EUR 607  in  January  2020  to 
EUR 1 153 
in  January  2026.  Nominal  wages 
increased  by  over  7%  in  2024  and  by  10%  in 
low.  This 
2025,  while 
resulted in strong real wage increases - by 6.3% in 
2024  and  2025,  and  real  wages  are  expected  to 
remain  among  the  fastest-growing  in  the  EU  in 
2026  (2.8%).  However,  in  comparison  with  other 
Member  States,  wages  remain  at  relatively  low 
levels,  and  in-work  poverty  rose  slightly  in  2024 
(to 8.4% vs 8.2% in the EU) and in 2025 (to 8.7% 
vs  8.3%  in  the  EU).  Young  people  (18-24)  were 
particularly affected, with in-work poverty rising by 
almost  10  pps  to  17.2%  in  2025  from  8.6%  in 
2023 (EU: 10.9%).  

increase 

in  a  significant 

following decreases by 2.7% in 2022 and 1.6% in 
2023.  Such  relatively  slow  growth  in  productivity 
overall,  in  combination  with  the  substantial  wage 
growth,  resulted 
in 
Lithuania’s  real  effective exchange  rates between 
2020 and 2024, which could imply risks to its cost 
competitiveness (217).  The  mechanism  for  setting 
the  minimum  wage  now  takes  into  account  the 
dynamics  of 
it 
remains  to  be  seen  if  this  will  result  in  a  better 
balance  between  labour  productivity  and  wage 
growth, as the government retains some discretion 
in setting the level of the minimum wage. Overall, 
there is further scope to boost productivity growth, 
including  through  accelerated  digitalisation,  more 
intensive  upskilling  and  reskilling  and  shifting  the 
economy to high value-added sectors, such as ICT.  

labour  productivity.  However, 

Low  collective  bargaining  coverage  risk 
limiting further progress in job quality. Trade 
union  density  was  among  the  lowest  in  the  EU 
(8.3% in 2022), and employer organisation density 
was  also  lower  compared  with  other  Member 
States (37.8%) (215). Collective bargaining coverage 
remains  very  low  at  29%  in  2023(216),  which 
hinders workers’ bargaining power and is likely  to 
slow  further  improvements  to  job  quality.  To 
address  this,  in  October  2024,  Lithuania  adopted 
an  action  plan  to  increase  collective  bargaining 
coverage.  However,  the  plan  relies  largely  on 
traditional  capacity-building  measures,  which  so 
far  have 
substantial 
not  brought  about 
improvements  in  the  coverage.  Amendments  to 
the  Labour  Code  are  also  being  prepared  to 
strengthen  collective  labour  relations  and  social 
partners’  representation.  Although  social  partners 
have  a 
in  policy  discussions, 
insufficient information is shared with them, which 
limits their impact (see 2025 country report). 

formal 

role 

Labour  productivity  lags  behind  the  wage 
growth,  implying  risks  to  Lithuania’s  cost 
competitiveness.  Real  labour  productivity  per 
hour  worked  recovered  in  2025  by  2.9%,  after 
having increased only marginally in 2024 by 0.3%, 

(214) This also indicates that low-wage and inactivity traps for 

second earners, which are relatively high in Lithuania, do not 
constitute a barrier to their labour market participation. 

(215) OECD database - OECD/AIAS ICTWSS v2.0. 

(216) OECD AIAS-ICTWSS 

databasehttps://www.etui.org/publications/road-80-collective-
bargaining-coverage. The threshold stipulated in the 
Minimum Wage Directive is 80%. 

(4.7%),  financial  and 

Labour  shortages  in  certain  sectors  hinder 
potential  productivity  gains.  In  2025,  labour 
market  slack  remained  below  the  EU  average 
(9.6%  vs  11.7%),  driven  by 
the  continued 
expansion of the labour force. This helped contain 
labour  shortages,  with  the 
job  vacancy  rate 
between 1.8% and 2% in the period from 2021 to 
2024  (EU:  2.4%  in  2024).  However,  in  2025  the 
overall vacancy rate rose to 2.2%, with intensified 
labour  shortages 
in  sectors  such  as  public 
administration  and  defence  (6%),  transportation 
and  storage 
insurance 
activities  (2.7%)  and  water  supply  and  sewage 
(2.4%). Furthermore, other areas already reporting 
labour  and  skills  shortages  or  expecting  them  in 
the near future include engineering and technology 
(including  ICT)  and  education (218)  (see  Annex  13). 
The ICT sector has expanded in recent years, also 
due  to  immigration  from  Belarus  (see  2025 
country report), with ICT specialists accounting for 
5.7%  of  total  employment  in  2025  (EU:  5.0%). 
However,  due  to  the  recent  tightening  of  the 
immigration  and  residence  rules,  high  rates  of 
drop-outs  and  slow  labour  market  absorption  of 
ICT  graduates, 
ICT 
professionals  risks  falling  short  of  the  demand, 
which  is  projected  to  grow  by  nearly  50%  by 
2035 (219) (see Annex 5 and Annex 13).  

the  overall  supply  of 

(217) Výškrabka, M. and A. Bodea (2026): ‘After the Inflation Shock. 
Taking Stock of Price Competitiveness in the EU’, European 
Economy Discussion Paper 240, Directorate-General for 
Economic and Financial Affairs, European Commission, see, in 
particular, pp. 25-26. 

(218) Strata scoreboard. 

(219) Cedefop skills forecast Lithuania 2025. 

94 

 
 
 
Adverse  demographic  trends  and  a  recent 
slowdown in labour migration pose long-term 
challenges  for  the  labour  force.  Lithuania 
experienced  a  net  loss  of  more  than  600 000 
residents  between  2003  (the  year  before  joining 
the  EU)  and  2021.  The  country’s  population  is 
projected  to  shrink  by  12%  between  2023  and 
2040,  contrary  to  the  expected  growing  trend  in 
the EU, and the working-age population (15-64) is 
projected  to  decline  by  18%  (6.7%  in  the  EU)  in 
the  same  period (220).  Although  a  surge 
in 
immigration  (mainly  from  Belarus  and  Ukraine, 
and  to  a  lesser  degree  from  Asian  and  African 
countries) increased the population (and the labour 
force) by nearly 80 000 between 2021 and 2024, 
this  trend  slowed  noticeably  in  2025,  also  due  to 
adjustments.  Natural 
security-driven 
population decline is forecasted to resume as early 
as  2026 (221). 
these 
demographic 
labour 
shortages,  which  underscores  the  urgency  of 
activating 
under-
represented  groups,  such  as  NEETs  and  persons 
with  disabilities.  In  addition,  the  country  lacks  a 
holistic  view  on  the  long-term  integration  of 
foreign 
by 
force, 
disagreements  between 
the  ministries  and 
municipalities  on  the  division  of  the  respective 
competences  in  this  field(222).  Further  efforts  to 
integrate  the  third  country  nationals  into  the 
society  are 
increasingly  needed  to  maintain 
sufficient human capital in key sectors and bolster 
Lithuania’s  competitiveness,  at  the  same  time 
avoiding shocks to the social fabric of the society.  

left  unaddressed, 
shifts  will  exacerbate 

exacerbated 

integrating 

labour 

better 

policy 

and 

If 

Lithuania  continues  its  transition  to  climate 
neutrality,  but  structural  challenges  remain. 
In  2025,  employment  in  the  country’s  energy-
intensive industries was 1.6% of total employment 
(EU:  3.5%).  At  the  same  time,  employment  in  the 
environmental  goods  and  services  sector  exceeds 
the  EU  average.  In  construction,  a  key  sector  for 
the green transition, the job vacancy rate remains 
considerably  lower  than  the  EU  average  (1.5%  vs 
2.8%  in  2025).  However,  labour  shortages  for 
certain  occupations  in  the  construction  sector  are 
more pronounced (see Annex 16).  

(220) https://ec.europa.eu/eurostat/statistics-
explained/index.php?oldid=497115. 

(221) Commission Autumn 2025 Economic forecast Lithuania. 

(222) https://www.lrt.lt/naujienos/lietuvoje/2/2918009/benkunskas-
prie-vrm-rinks-parasus-kad-salyje-gyvenantys-uzsienieciai-
moketu-lietuviskai  

95 

 
 
 
ANNEX 12: SOCIAL POLICIES 

the 

adequacy 

in  addressing 

Lithuania continues to face persistently high 
levels of income inequality and a high risk of 
poverty  and  social  exclusion.  The  2025 
recommendations  highlighted 
country-specific 
inequality, 
income 
challenges 
poverty  and  social  exclusion  and  recommended 
increasing 
and 
coverage, 
effectiveness  of  the  social  protection  system, 
improving  the  design  of  the  tax  system,  and 
increasing  the  adequacy  of  old-age  pensions. 
Income  inequality  remains  a  pressing  challenge, 
due to the limited redistributive capacity of the tax 
benefit system and its low and decreasing impact 
on  poverty  reduction.  The share  of  the  population 
facing  poverty  or  social  exclusion  risks  has 
increased, driven by the low adequacy of pensions 
coverage  gaps,  and 
and 
inadequate  access  to  quality  inclusive  education, 
employment  support  and  health  and  social 
services.  These  risks  are  particularly  high  for 
certain  groups  such  as  unemployed  people,  older 
people  (65+)  and  persons  with  disabilities.  The 
majority of those affected live outside the capital 
region and in rural areas, including certain counties 
bordering  Russia  and  Belarus.  Energy  and 
transport 
high. 
Addressing  these  challenges  would  contribute  to 
inclusive growth and competitiveness.  

social  benefits, 

relatively 

poverty 

remain 

Poverty and social exclusion rates are rising, 
putting the 2030 poverty reduction target at 
risk.  The  percentage  of  people  at  risk  of  poverty 
or social exclusion (AROPE) rose to 26.3% in 2025 
(from  24.3%  in  2023  and  25.8%  in  2024)  and 
remains  significantly  above  the  EU  average  of 
20.8%. The number of people at risk of poverty or 
social exclusion rose to 762 000 in 2025, marking 
an increase in absolute terms of 50 000 compared 
to  2019.  This  puts  Lithuania’s  commitment  to 
reduce  this  number  to  489 000  by  2030  at 
significant risk. The increase in the AROPE rate was 
driven by the growing proportion of people living in 
households  with  very  low  work  intensity,  and  the 
percentage of people at risk of poverty (AROP). On 
the  other  hand,  the  child  AROPE  rate  dropped  to 
19.9%  in  2025,  substantially  lower  than  the  EU 
average  of  24.3%.  Furthermore,  the  share  of  the 
population experiencing severe material and social 
deprivation  in  2025  remained  below  the  EU  level 
for  the  fourth  consecutive  year  (5.5%  vs  6.3%  in 
the EU).  

Graph A12.1: Poverty and social exclusion 

Source: Eurostat, EU-SILC [ilc_peps01n, ilc_li02, ilc_mdsd11, 
ilc_lvhl11n] 

The  rate  of older  workers, young people and 
those  with  a  low  educational  attainment 
level  living  in  very  low  work  intensity (223) 
households  contributed  to  rising  poverty 
risks. The share of people living in very low work 
intensity  households  increased  to  9.4%  in  2024 
and  11.4%  in  2025  (EU:  7.9%).  It  was  most 
pronounced  in  the  55-59  and  18-24  age  groups, 
where it rose to 17.5% (EU: 10.2%) and 13% (EU: 
7.8%)  respectively,  and  for  those  with  a  low 
educational  attainment  level  where  it  spiked  to 
34.3% (EU: 17.3%). Those in the 18-24 age group 
with 
levels  were  particularly 
affected  (22.1%  vs  12.8%  in  the  EU).  This  may 
also  be  related  to  the  2023-2024  increase in  the 
share of early leavers from education and training 
(see Annex 13) and in the number of young people 
neither in employment, nor education and training 
(NEETs)  in  the  same  period  (see  Annex  11).    In 
2025, 74.8% of people in very low work intensity 
households were at risk of poverty (EU: 64.1%). 

low  education 

(223) People aged 0-64 years living in households where the 

adults (those aged 18-64, but excluding students aged 18-
24, and people who are retired according to their self-
defined current economic status or who receive a pension 
(except survivor’s pension), as well as people in the age 
bracket 60-64 who are inactive and living in a household 
where the main income is pensions (except survivor’s 
pension)) worked a working time equal to or less than 20% 
of their total combined work-time potential during the 
previous year. 

96 

051015202530352016201720182019202020212022202320242025% of populationAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material and social deprivationPeople living in low work intensity households 
 
  
 
in 

Persistent  and  widening  income  inequalities 
are  leaving  more  people  below  the  poverty 
threshold.  The  AROP  rate  rose  from  20.6%  in 
2023  to  21.5%  in  2024  and  22.6%  in  2025  (EU: 
16.3%). Although the social benefits were raised in 
increases  did  not 
these 
2023  and  2024, 
counterbalance 
the  poverty 
increase 
the 
threshold (224),  which  reached  EUR 616  in  2024 
and  EUR  699  in  2025,  and  was  fuelled  by  strong 
wage  growth  (see  Annex  11).  Furthermore,  the 
depth  of  poverty 
third 
consecutive year, with the relative poverty gap (225) 
widening to 25.5% in 2024 and 26% in 2025 (EU: 
22.5%).  The  income  gap  between  the  lowest  and 
middle-income groups (S50/S20 ratio) rose to 2.61 
in 2024 (EU: 2.18). The income quintile share ratio 
(S80/S20) also increased in 2024 and remained at 
the same level in 2025, with the income of the top 
20% being 6.5 times that of the bottom 20% (EU: 
4.6).  According  to  national  statistics (226),  7%  of 
living  below  the 
Lithuania’s  population  were 
absolute  poverty  threshold  in  2025  compared  to 
3.6% in 2023.  

increased 

the 

for 

The  effectiveness  of  social  transfers  in 
reducing  poverty  is  low,  while  gaps  in  the 
coverage  and  adequacy  of 
the  social 
protection  system  remain.  Spending  on  social 
benefits  in  Lithuania  stood  at  16.9%  of  GDP  in 
2024,  significantly  below  the  EU  average  of 
27.3%.  The  impact  of  social  benefits  (excluding 
pensions)  on  poverty  reduction  is  also  relatively 
low,  despite  the increase in  2025  (from  25.9% in 
2024 to 27.3% in 2025 vs 33.2% in the EU). The 
adequacy  of  social  benefits  remains 
low  – 
increases,  the  absolute 
regardless  of  annual 
majority  of  these  benefits  remain  well  below  the 
poverty 
in-cash  social 
assistance additionally suffering from low take-up 
levels. This is aggravated by the remaining gaps in 
social  protection  coverage  –  only  42.9%  of 
unemployed people received any social benefits in 
2025  (EU:  54.8%),  which  partly  explains  their 
higher AROP rate (61.9% in 2025 vs 49.3% in the 

threshold,  with 

the 

(224) The threshold is set at 60% of the national median 

equivalised disposable income (after social transfers). 

(225) The relative median at-risk-of-poverty gap is calculated as 
the difference between the median equivalised disposable 
income of people below the at-risk-of-poverty threshold and 
the at-risk-of-poverty threshold, expressed as a percentage 
of the at-risk-of-poverty threshold (cut-off point: 60% of 
national median equivalised disposable income). 

(226) National Data Agency database. 

97 

EU).  The  take-up  of  voluntary  insurance  schemes 
low, 
among 
contributing  to  their  relatively  high  AROP  rate 
(25.9% in 2025 vs 20.1% in the EU).  

self-employed  was  very 

the 

inter  alia 

reform,  which 

While  Lithuania  recently  adopted  a  number 
of  policy  measures  to  reduce  poverty  and 
income  inequality,  their  impact  is  yet  to  be 
seen.  Under  the  recent  personal  income  tax 
reform  adopted  as  part  of  the  recovery  and 
resilience  plan,  unified  personal  income  tax  rates 
of  20%,  25%  (additional  tax  bracket)  and  32% 
apply to combined income, depending on the level 
of income. To improve the coverage, adequacy and 
effectiveness  of  the  social  protection  system, 
Lithuania  adopted  the  unemployment  insurance 
the 
raises 
benefit 
minimum  unemployment  benefit,  and 
the 
minimum  income  reform,  with  one  of  the  aims 
being  to  improve  the  adequacy  and  indexation  of 
minimum  income  benefits  and  expand  eligibility 
criteria. However, the effects of these reforms are 
yet to be seen, although the first two reforms are 
expected  to  have  only  a  marginal  impact  on 
income inequality and poverty (227). To improve the 
adequacy  of  financing  for  social  protection,  the 
minimum  income  reform  introduced  an  improved 
financing  model  for  in-cash  social  assistance, 
the 
starting 
availability and coverage of social services across 
the  country,  Lithuania  finances  a  considerable 
proportion  of  social  services  directly  from  the 
national  budget  and  plans  to  introduce  social 
service  ‘baskets’  customised  to  the  needs  of 
individuals,  which  would  set  minimum  levels  of 
the 
funding 
availability  of  social  services  (especially  those  for 
families and vulnerable groups) across the country 
remains uneven and financing is heavily reliant on 
EU  funds.  Implementation  of  the  European  Child 
Guarantee  helps  alleviate  child  poverty  through 
positive  actions  in  most  areas,  but  there  remains 
scope for further measures. Overall, Lithuania has 
earmarked  over  EUR 441  million  from  European 
Social  Fund  Plus  for  social  inclusion.  However,  in 
the  light  of  worsening  social  outcomes,  continued 
efforts will be crucial to achieve the 2030 poverty 
reduction target.  

from  mid-2026.  To 

services.  However, 

improve 

social 

for 

(227) The simulation was performed by the European Commission, 
Joint Research Centre, based on the EUROMOD model, J2.0+. 

 
 
 
  
Regional  differences  in  poverty  and  social 
exclusion rates are significant  and widening. 
In the capital  region the AROPE rate  in 2025 was 
16.4%, considerably lower than 30.7% in the rest 
of  Lithuania.  The  share  of  households  with  very 
low  work  intensity  outside  the  capital  is  almost 
three  times  higher  than  in  the  capital  (14.4%  vs 
5.1%). Similarly, at 26.2% in 2025, the AROP rate 
outside the capital was almost double the rate of 
14.4% in the capital. The AROP rate in rural areas 
was particularly high (29.8% in 2025 vs 17.2% in 
the  EU).  Certain  counties  bordering  Belarus  and 
Russian Kaliningrad remain severely affected, with 
in  Tauragė,  Alytus, 
AROP 
Marijampolė  and  Utena 
The 
percentage of people experiencing severe material 
and  social  deprivation  was  more  than  twice  as 
high outside the capital region (6.7%) as it was in 
the capital (2.7%). These disparities are caused by 
structural  weaknesses,  notably  a  lower  level  of 
(see 
economic  activity,  higher  unemployment 
Annex  11)  and  less  access  to  quality  public 
services  in  the  regions  outside  the  capital  and 
close  to  the  border  with  Russia  and  Belarus  (see 
Annex 18).  

rates  very  high 

counties (228). 

living 

The  social  situation  of  persons  with 
disabilities  continues  to  deteriorate.  Their 
AROPE  rate  has  remained  persistently  high  over 
the years and increased further in 2025 to 50.5%, 
the  highest  in  the  EU  (EU:  28.8%).  All  the  AROPE 
components rose, with the biggest increase in the 
share  of  persons  with  disabilities 
in 
households with very low work intensity (39.7% vs 
18.9% in the EU). For persons with disabilities, the 
rate of severe material and social deprivation and 
the AROP rate increased to 13.1% (EU: 10.5%) and 
43.5%  (EU:  20.9%)  respectively.  They  are  both 
closely 
low  employment  rates 
affecting  this  group  (see  Annex  11)  and  the  low 
impact  of  social  benefits  (including  pensions)  on 
reducing poverty (37.1% in 2025 vs 47.3% in the 
EU).  The  recent  one-stop-shop  and  disability 
assessment reform has not yet brought about the 
desired  results,  as  the  number  of  individual 
support  plans 
increasing, 
remains  very  low  and  there  are  gaps  in  the  data 
exchange  between  the  relevant  institutions.  It  is 
too early to assess the impact of the 2024 reform 
on  improving  the  incentives  for  persons  with 
disabilities  to  find  jobs  by  allowing  them  to  work 
and  still  receive  their  disability  pensions  and  by 

in  place,  although 

linked  to  the 

(228) State data agency. 

98 

expanding  the  eligibility  criteria  for  disability 
pensions.  The  government  plans  to  expand  social 
housing  with  specific  attention  to  persons  with 
disabilities,  and  to  ensure  sufficient  integrated 
assistance for this group. Overall, Lithuania would 
benefit  from  a  more  holistic  approach  to  persons 
with 
coordinated 
education, labour market, social inclusion, housing 
improve  their 
and  other  relevant  policies  to 
situation. 

encompassing 

disabilities, 

Older  people  face  higher  poverty  risks, 
exacerbated  by  low  pension  adequacy  and 
limited availability of care services. More than 
a  third  of  the  population  above  65  years  of  age 
(40.5%) were at risk of poverty or social exclusion 
(EU:  18.8%),  with  monetary  poverty  being  the 
main  driver.  The  AROP  rate  of  this  population 
group  stood  at  39.2%  in  2025  (EU:  16.3%),  with 
the  percentage  of  women  at  risk  of  poverty 
(44.1%)  substantially  higher  than  that  of  men 
(30.4%)  (see  2025  country  report).  The 
low 
adequacy of pensions is a significant determinant 
of  old-age  poverty:  although  the  old-age  social 
insurance pension increased to EUR 605 in 2024, it 
remained below the poverty threshold of EUR 699. 
The aggregate pension replacement ratio in 2025 
continued to be among the lowest in the EU (0.37 
vs  0.6).  The  median  income  of  people  aged  over 
65 stood at 62% of the income of those under 65 
(EU: 91%). Rapid population ageing, limited access 
to  long-term  care  (LTC)  and  the  highest  rate 
(31.43% in 2024) of out-of-pocket expenditure for 
healthcare  in  the  EU  exacerbate  these  challenges 
(see Annex 15). Public spending on LTC is relatively 
low  (1%  of  GDP  in  2022  vs  1.7%  in  the  EU)  and 
high  out-of-pocket  payments  limit  access  to  LTC. 
The financing of LTC services remains fragmented 
and fails to meet rising demand in a rapidly ageing 
society (see  2025  country  report).  To  address the 
2025 recommendation on increasing the adequacy 
of  old-age  pensions,  the  government  announced 
its intention to improve the indexation of pensions 
and  to  implement  silver  economy  measures  to 
further  boost  the  number  of  older  people  in  the 
labour  force.  At  the  same  time,  the  government 
recently  reformed  the  second  pillar  pension 
accumulation scheme by abolishing the automatic 
enrolment of citizens and allowing contributors to 
withdraw their accumulated funds as of 2026 (see 
also 
other 
organizations  raised  concerns  that  the  reform 
might  erode  saving  discipline,  reduce  the  level  of 
savings and reverse progress on pension adequacy 
in the longer term. 

Commission 

Annex 

and 

6). 

 
 
Energy  poverty  remains  high.  The  housing 
stock  overall  is  of  poor  energy  efficiency,  as 
around  80%  of  residential  buildings  were  built 
before  1993  and  have  been  poorly  maintained 
(see Annex 16). The share of the population unable 
to  keep  their  homes  adequately  warm,  albeit 
declining,  was  almost  double  the  EU  average  in 
2025  (16.7%  vs  8.8%),  and  stood  at  31.6%  for 
people  at  risk  of  poverty  (EU:  19.6%).  Although 
in  2024  and  2025 
energy  prices  decreased 
compared  with 
the 
increase  in  VAT  for  heating  and  hot  water  from 
9%  to  21%  as  of  2026  together  with  the  record 
cold  winter  months  resulted  in  a  steep  rise  in 
heating  costs.  The  recent  conflict  in  Iran  could 
further 
increase  energy  prices.  The  existing 
allowance scheme for low-income households will 
provide  partial  mitigation  against  the  increase  in 
their heating and hot water bills (see Annex 16).  

the  2022-2023  period, 

problem 

significant 
to 

is  also  high  and 
Transport  poverty 
in 
constitutes 
a 
Lithuania.  Due 
low  population  density, 
Lithuania’s  public  transport  network  does  not 
enable users to reach essential services within an 
acceptable  time  in  many  rural  areas.  This  has 
resulted in the EU’s highest reliance on passenger 
cars for land transport (92.1% for passenger-kms 
vs 8.2% in the EU(229)), with a very low propensity 
for  taking  the  train  (1%  for  passenger-kms  vs 
8.4%  in  the  EU)  or  for  using  buses  and  coaches 
(6.8% vs 8.2% the EU average) (see also Annex 8 
and Annex 18).  

(229) Eurostat 2023. 

99 

 
 
ANNEX 13: EDUCATION AND SKILLS 

education, 

in  higher 

Skills  development  in  Lithuania  is  hindered 
by gaps in basic skills, limited attractiveness 
and  labour-market  relevance  of  vocational 
(VET),  declining 
education  and  training 
skills 
enrolment 
mismatches  and  shortages,  and  low  adult 
learning  participation.  Participation  in  early 
childhood  education  and  care  (ECEC)  and  tertiary 
educational  attainment  are  high  by  EU  standards; 
however,  significant  challenges  remain  across  the 
educational cycle in education quality, equity gaps, 
efficiency  and  teacher  shortages  –  particularly  in 
science, technology, engineering and mathematics 
(STEM)  subjects  and  in  rural  areas.  While  labour 
and  skills  shortages  persist,  the  attractiveness  of 
VET  remains  low,  as  does  the  share  of  adults 
engaged  in  learning  activities.  Higher  education 
faces persistent challenges, in particular relatively 
modest  STEM  enrolment  rates.  These  and  other 
weaknesses  in  skills  development  and  human 
capital  formation,  lack  of  data-based  decision 
making,  together  with  a  projected  decline  in  the 
working-age  population  (see  Annex  11),  limit 
innovation  capacity, 
Lithuania’s  potential  for 
productivity  growth  and  competitiveness.  The 
2025 country-specific recommendations (CSRs) for 
Lithuania  highlighted  the  need  to:  (i)  incentivise 
enrolment  in  post-secondary  education  in  STEM 
fields; 
the  quality,  equity  and 
efficiency  of  the  general  education  system;  (iii) 
increase 
teaching 
profession;  and  (iv)  address  the  skills  mismatch 
through  increased  labour-market  relevance  of 
higher education, the promotion of green skills and 
improved adult learning for vulnerable groups. 

the  attractiveness  of 

improve 

the 

(ii) 

to  ECEC  continues 

Access 
to  expand, 
supported by broader legal entitlements, but 
the  rural-urban  gap  persists.  Participation  of 
in  formal  childcare  or 
children  under  three 
education  reached  36.9%  in  2024  (EU  average: 
39.3%)  and  43.8%  in  2025  (EU  average:  40.5%), 
while  national  administrative  data  indicate  a 
higher  rate  of  44.4%  in  2025.  Despite  this 
progress, enrolment remains significantly  lower in 
rural  areas,  particularly  for  vulnerable  children. 
Since  September  2024,  all  three-year-olds  are 
guaranteed  a  place  in  ECEC,  and  from  September 
2025, this legal entitlement was extended to cover 
all  two-year-olds.  Additional  national  funding  was 
allocated  in  early  2025  to  support  access  for 
vulnerable  children,  alongside  plans  to  create  at 
least 2 000 new preschool places for children with 
vulnerabilities.  By  2027,  national  targets  aim  for 
70% participation in ECEC among 2-5-year-olds in 

intensifying 

rural  areas (230)  (46.3% in 2020). Rapid expansion 
staffing 
is 
challenges, as ECEC staff shortages persist despite 
recent  measures  to  improve  pay  and  working 
conditions.  

infrastructure  and 

Equity  challenges  and  pronounced  urban-
rural  disparities  are  among  the  most 
persistent  weaknesses  of  the  education 
system.  According  to  PISA  2022,  the  EU  equity 
indicator  shows  lower  rates  of  good  performance 
across  basic  skills  among  socio-economically 
disadvantaged students (13.9%) than in the EU on 
average (16.3%). The city-rural score gap in 2022 
was  drastically  higher  than  the  EU  average;  with 
71 points in mathematics (EU  average: 46); 70 in 
reading  (EU  average:  52)  and  69  in  science  (EU 
average:  46).  Rural  areas  are  characterised  by  a 
high number of small schools with higher teacher 
shortages.  Lithuania  has  sought  to  rationalise  its 
school  network  with  support  from  the  Recovery 
and Resilience Facility (RRF), including through the 
Millennium  Schools  Programme,  which  has 
allocated 
infrastructure, 
learning environments, STEAM(231) labs and digital 
equipment, 
large-scale  professional 
development for school leaders and teachers, and 
established  competence  centres  and  inter-school 
collaboration models. Early evidence indicates that 
schools  participating  in  the  Millennium  Schools 
Programme  have  performed,  on  average,  better 
than non-participating schools. 

for  school 

launched 

funding 

The  dynamics  of  the  share  of  early  leavers 
from  education  and  training  (ELET)  is  an 
emerging  challenge  for  competitiveness.  In 
just two years, the ELET rate (among 18-24-year-
olds) increased from 4.8% (2022) to 8.4% (2024) 
before  decreasing  in  2025  to  5.9%  (EU  average: 
9.1%)(232). Approximately 8 out of 10 early school 
leavers were not employed and 6 out  of 10 were 
inactive  in  2025 (233).  The  gender  gap  is  smaller 
than  the  EU  average;  in  2025,  the  ELET  rate  was 
at 6.6% for males (EU average: 10.6%), compared 

(230) Agreement on National Education Policy (2021-2030) - 

Švietimo, mokslo ir sporto ministerija. 

(231) STEAM: science, technology, engineering, arts, and 

mathematics. 

(232) https://osp.stat.gov.lt/lt/statistiniu-rodikliu-

analize?hash=7a505de2-ca2e-4038-b884-
2ecd66f43d4aEurostat, [edat_lfse_14] 

(233) Early leavers from education and training by labour status. 

100 

 
 
 
 
 
to  5.2%  for  females  (EU  average:  7.5%).  Early 
school leaving is prevalent in rural areas, where it 
stood at 7.3% in 2025 (EU: 9.6%), up from 6.7% in 
2022.  The  share  is  also  markedly  high  among 
persons  with  disabilities  in  2023  (25.3%;  EU 
average:  19.1%,  see  Annex  11).  Lithuania  is 
closely analysing the reasons behind this variation 
in  the  share  of  early  school  leavers,  which  likely 
include  equity  and  urban-rural  fragmentation 
challenges  (see  above).  The  rise  in  early  school 
leaving  has  a  negative  knock-on  effect,  as  it  also 
increases  the  share  of  young  people  not  in 
employment,  education  or  training  (NEET)  (see 
Annex 11)  and young people at risk of poverty  or 
social exclusion (see Annex 12). While early school 
leaving is not addressed as a standalone priority in 
the  Agreement  on  National  Education  Policy 
(2021-2030) (234),  emphasis  on  long-term  state 
investment and commitment to improve education 
quality  and  equity  as  well  as  inclusive,  accessible 
education  for  all  learners  may  indirectly  support 
efforts to reduce it.  

Lithuania  has  taken  steps  to  address  key 
education  challenges,  but  the  effectiveness 
of measures is yet to be seen. Since September 
2023,  all  schools  have  been  implementing  a  new 
competence-based  curriculum,  yet  its  outcomes 
are still to be assessed. Funded by the RRF, around 
4 000 teachers are expected to complete practice-
oriented 
In  addition, 
requirements  for  upper-
minimum  class-size 
secondary  grades  in  small  schools  have  been 
relaxed (235),  and  the  funding  for  maintaining 
smaller  classes  is  now  shared  between  the  state 
and municipalities. This measure aims to increase 
the accessibility of education but may also impact 
education quality.  

training  by  mid-2026. 

Teachers are central to developing the skills 
of  the  future  workforce,  yet  the  teaching 
workforce 
is  ageing  rapidly  and  faces 
persistent  shortages.  According  to  TALIS  2024, 
in 2023, 58.5% of lower-secondary teachers were 
aged  50  or  older,  compared  to  an  EU  average  of 
39.9%. Teachers report high workload levels,  with 
lower-secondary  teachers  working  on  average 
45.9 hours per week, well above the EU average of 
39  hours.  Salary  satisfaction  has  improved,  rising 

from 11.1% in 2018 to 28.4% in 2024, although it 
the  EU  average  of  37.3%. 
remains  below 
Perceptions  of  societal  recognition  remain  limited 
yet exceed the EU average (15.4%), with 20.5% of 
teachers reporting that they feel valued by society. 
To  improve  attractiveness  of  the  profession,  as 
recommended  in  2025,  Lithuania  is  expanding 
alternative  and  simplified  entry 
into 
teaching for second-career entrants, including paid 
strengthened  mentoring  during 
traineeships, 
practice  as  well  as  a  two-year  professional 
pedagogical  programme  worth  120  ECTS(236)  for 
higher  education  students,  alongside  continued 
real wage increases. 

routes 

The  labour  market  relevance  of  VET  has 
improved,  but  its’  attractiveness  remains 
low.  Following  the  extensive  measures  taken 
under  the  RRP  (see  2025  Country  Report),  the 
employment  rate  of  people  who  have  recently 
completed  VET  (20-34)  has  surpassed  the  EU 
average  in  2025  (81.7%  vs  80.2%).  Participation 
in work-based learning is steadily rising, also as a 
result of implemented RRP measures, closing in on 
the EU average (61.1% vs 66% in the EU in 2025). 
However,  Lithuania  is  struggling  to  make  its  VET 
system  more  attractive,  as  the  share  of  pupils  in 
medium-level (ISCED 3-4) VET has hovered around 
36%  since  2020,  reaching  37%  in  2024  (EU: 
52.9%). Career guidance in schools was introduced 
in  2023  and,  from  2020,  pupils  in  the  last  four 
years of general secondary education (grades 9 to 
12)  can  enrol  in  experimental  VET  programmes. 
These  RRF  measures  have 
the 
attractiveness  of  upper-secondary  (ISCED  3)  level 
levels  that  have 
VET, 
surpassed  pre-pandemic  figures  (16 722  pupils 
enrolled  in  2024  vs  16 583  in  2019).  However, 
these  gains  have  been  more  than  offset  by  a 
marked  decrease  in  the  number  of  learners 
enrolled  in  post-secondary  non-tertiary  (ISCED  4) 
level  VET  (8 866  learners  enrolled  in  2024  vs 
12 594  in  2019).  Although  demand  for  medium-
level  skills  is  projected  to remain  relatively  stable 
up  to  2035,  supply  is  expected  to  fall  short  of 
projected  needs (237).  To  address  this,  Lithuania 
continues  to 
its 
recovery  and  resilience  plan  (RRP)  (see  2025 
Country Report) and to invest in VET infrastructure 
and 
in 

implement  measures  under 

leading  to  enrolment 

sectors  where  VET 

programmes 

increased 

(234) Agreement on National Education Policy (2021-2030) - 

Švietimo, mokslo ir sporto ministerija. 

(236) ECTS: European credit transfer and accumulation system 

(235) Amendments to the Rules on the Establishment of the 

(237) Cedefop (2025 Skills Forecast). See also national forecasts 

School Network. 

by STRATA. 

101 

 
 
 
investments  are  estimated  to  have  the  greatest 
practical  and  strategic  impact  in  support  of  the 
digital and green transformations. 

While  Lithuania  records  one  of  the  highest 
tertiary  educational  attainment  rates  in  the 
EU,  enrolment 
in  higher  education  has 
declined. In 2025, 60.8% of 25-34-year-olds held 
(EU  average:  44.8%). 
a  tertiary  qualification 
Women  continue  to  significantly  outperform  men, 
contributing  to  one  of  the  largest  gender  gaps  in 
tertiary attainment in the EU (17.1p.p.; EU average: 
11.3p.p.).  The  employment  rate  of  recent  tertiary 
graduates is high. Lithuania had one of the highest 
shares  of  people  aged  15-34  with  a  medium  or 
high  level  of  education  reporting  a  very  high  or 
high  match  between  their  field  of  education  and 
their  current  or 
job  requirements 
last  main 
(76.1%) (238).  At  the  same  time,  enrolment  in 
higher  education  (ISCED  6–7)  has  declined,  from 
25.8%  in  2015  to  23.7%  in  2023,  reflecting 
demographic  trends  including  decreasing  birth 
rates and an ageing population. This contributes to 
broader skills imbalances, with the macroeconomic 
skills  mismatch (239)  remaining  above  the  EU 
average  (21%  vs  19.2%  in  2024).  Lithuania  has 
received  support  from  the  Technical  Support 
Instrument to strengthen the system of evaluation 
and  quality  assurance  of  higher  education  and 
VET,  with  a  view  to  improve  the  quality  and 
labour-market  relevance  of  both  sectors  and 
enhance system-level collaboration (240). 

To  address  declining  enrolment  and  improve 
labour-market  relevance,  reforms  supported 
by  the  RRF  are  reshaping  the  higher 
education landscape. Five college mergers were 
completed  between  July  and  October  2024, 
integrating  several  colleges  into  universities,  with 
institutional 
new  quality-based 
performance,  including  labour  market  alignment 
and student numbers, planned from 2028. Access 
for  disadvantaged  students  was  eased  in  2024 
through  a  dedicated  admission  track  reserving  up 
to 
annually. 
Additionally,  by  the  end  of  2025,  around  13 000 

state-funded 

criteria 

places 

1 300 

for 

students  were  expected  to  receive  state  funding 
for  first-cycle  places  and  study  scholarships. 
Internationalisation continues to expand, with 77.6 
graduates  who  pursued  their  degree  abroad  from 
non-EU  countries  per  1 000  graduates  in  2023, 
well above the EU average of 57.2, while outward 
degree mobility reached 10.1% (EU average: 11%) 
and  credit  mobility  5.5%  (EU  average:  6.6%). 
According  to  an 
independent  DAAD  forecast, 
11 500  foreign  students  were  enrolled  in  the 
2024/2025  academic  year(241).  The  effectiveness 
of  these  measures  in  reducing  skills  mismatches 
remains to be seen. 

and 

information 

Shortages  of  STEM  professionals  reflect 
persistent  mismatches  between  education 
outcomes  and  labour  market  demand.  At 
tertiary  level,  the  share  of  students  enrolled  in 
STEM  fields  remained  broadly  stable  at  around 
25% in 2023 (EU average: 26.9%) and well below 
the proposed EU target of 32% by 2030, although 
provisional  national  data  for  2024  indicate  a 
rebound  to  28.4% (242).  Gender  disparities  remain 
pronounced,  with  women  accounting  for  only 
27.3%  of  tertiary  STEM  students  in  2023,  below 
the EU average (EU target: 40%), and the share of 
female 
communications 
technology  (ICT)  doctoral  students  declining  to 
26.9%, down from 29.5% in 2021, resulting in an 
overall  supply  of  ICT  graduates  below  labour 
market  demand (243).  Furthermore,  Lithuania 
reports high dropout rates and weak labour market 
absorption,  with  only  about  half  of  ICT  students 
completing 
their  studies  and  only  52%  of 
graduates  working  in  ICT  one  year  later.  In 
medium-level  VET,  enrolments  in  STEM  fields 
(49.7%  of  all  medium-level  VET  pupils)  exceeded 
the EU average of 36.6% in 2024, but the gender 
gap remains large, with just 9.9% females enrolled 
in  STEM  VET in  2024,  (EU  average:  15.9%).  Given 
the decreasing enrolment numbers in both tertiary 
education  and  VET,  as  well  as  the  demographic 
challenges, it is likely that the levels of new STEM 
graduates  will  not  meet  labour  market  demand 
(see  2025  Country  Report),  which  is  expected  to 
grow further, especially in ICT (244). To address this 
and  the  2025  CSR  on  incentivising  enrolments  in 

(238) lfso_24match06. 

(239) The macroeconomic skills mismatch indicator measures the 
dispersion of employment rates across skill groups (proxied 
by qualification levels, with ISCED 0-2 low; 3-4 medium and 
5-7 high). Source: Commission’s own calculations. 

(240) Ensuring Quality Vocational and Higher Education in 

Lithuania | OECD. 

(241) Deutscher Akademischer Austauschdienst. 

(242) LAMA BPO (2024). 

(243) Job Creation and Local Economic Development 2024 - 

Country Notes: Lithuania | OECD. 

(244) Cedefop (2025 Skills Forecast).  

102 

 
 
 
including 

scholarship 

post-secondary  STEM  programmes,  national 
initiatives, 
initiatives, 
unlimited  state-financed  places  for  females  in 
STEM, 
the 
Millennium Schools Programme, aim to strengthen 
STEM  provision  and  reduce  regional  disparities, 
although progress remains uneven. 

the  STEAM  education  plan  and 

The alignment between skills forecasting and 
skills development remains fragmented. 72% 
of  small  to  medium-sized  enterprises  face  skills 
shortages  for  at  least  one  job  role (245).  With  the 
working-age  population  projected  to  decline  and 
persistent skills shortages, there is a growing need 
for  a  close  link  between  skills  forecasting  and 
skills  development,  yet 
remains 
fragmented across multiple institutions and levels 
(see  2025  Country  Report).  The 
level  of 
engagement  of  various  stakeholders  and  social 
partners in public consultations on the planning of 
state-funded  VET  places  varies  from  region  to 
region.  

this 

link 

of 

increase 

reflecting 

Adult  participation  in  education  and  training 
remains  low.  According  to  the  adult  education 
survey,  participation  in  adult  learning  stood  at 
27.4%  in  2022,  well  below  the  EU  average  of 
39.5%  and  Lithuania’s  2030  national  target  of 
just 
an 
53.7%, 
2.4 percentage  points  since  2016.  The  level  of 
adult  learning  is  particularly  low  among  adults 
working  in  energy-intensive  industries  (8.3%;  EU 
average:  11.7%).  More  recent  data,  from  the 
labour force survey, suggest a possible increase in 
participation  rates  between  2022  and  2024.  The 
need  to  improve  adult  participation  in  learning  is 
further  underscored  by  the  2023  PIAAC  results, 
which  show  low  scores  and  significant  decreases 
in  both literacy  and  numeracy  for  adults (246).  The 
in  2024  (see  2025 
ILA  platform 
Country Report) has quickly gained attraction, with 
more  than  18 000  individuals  having  completed 
courses  via  the  platform  by  mid-February  2026, 
but  these  results  are  not  yet  reflected  in  the 
official statistics. 

introduced 

learning  accounts 

The  acquisition  of  green  and  digital  skills  is 
is  uneven. 
improving,  but  the  progress 
Lithuania  has  placed  an  emphasis  on  developing 
and  improving  its  population’s  digital  skills,  by 
funding  digital  education  infrastructure  in  schools 
and  prioritising  digital  skills  acquisition  on  the 
individual 
(ILA)  platform. 
However, the progress in digital skills is slow, with 
53.8%  of  the  population  having  at  least  basic 
digital skills (EU average: 60.4%) in 2025, up from 
52.9%  in  2023  (EU  average:  55.56%  in  2023). 
Performance  among  young  people  is  significantly 
stronger,  reaching  80.7%  among  those  aged  16-
24  (EU  average:  74.5%).  This  suggests  that 
improvements  are  likely  to  continue  over  time  as 
younger cohorts enter the workforce. However, the 
digital proficiency among the older population (55-
74)  was  only  23.94%  (EU  average  40.6%).  In 
2025, Lithuania received a CSR on addressing the 
skills  mismatch  by  promoting  the  acquisition  of 
green  skills.  To  address  this,  green  skills  are 
increasingly  embedded  in  the  general  education 
competence-based 
promoted 
curricula 
through  the  continued  implementation  of  the  RRP 
measure  on  the  creation  and  update  of  VET 
programmes (see 2025 Country Report), as well as 
through the adult learning platform kursuok.lt.   

and 

(245) Eurobarometer survey 2023. 

Lithuania  is  taking  steps  to  further  boost 
adult  learning,  but  areas  for  improvement 
remain.  In  2025,  Lithuania  received  a  CSR  on 
addressing the skills mismatch by improving adult 
including  for  vulnerable  groups.  To 
learning, 
address  this,  certain  novelties  have  been  recently 
introduced to the ILA platform, including prioritised 
access  for  vulnerable  groups (247)  and  integration 
with  the  public  employment  service’s  information 
system.  The  government  also  plans  to  develop  a 
micro-credential  system  and  integrate  it  with  the 
ILA system, to further enhance lifelong learning. As 
part  of  its  medium-term  fiscal-structural  plan, 
Lithuania  aims  to  enable  at  least  15 000  people 
per  year 
to  acquire  new  competences  by 
combining  state  and  municipal  adult  education 
funding  measures  within  the  ILA  system  and 
introducing  a  sustainable,  budget-based  funding 
model.  At  the  same  time,  the  labour-market 
relevance  of  the  training  offers  in  ILA  system 
could be further improved. 

(246) Do Adults Have the Skills They Need to Thrive in a Changing 

World? | OECD. 

(247) Such as persons with disabilities, those living outside cities, 
individuals who acquired their qualifications more than 10 
years ago, low-skilled people and older people (50-65). More 
info here: https://kursuok.lt/naujienos/atnaujinamas-kursuok-
lt-finansavimas-gyventojai-registruotis-mokymams-gales-
jau-lapkriti. 

103 

 
 
 
ANNEX 14: SOCIAL SCOREBOARD 

Table A14.1:  Social Scoreboard for Lithuania 

Update of 4 May 2026. Members States are categorised based on the Social Scoreboard according to a methodology agreed with 
the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2026 for details on the methodology 
(https://employment-social-affairs.ec.europa.eu/joint-employment-report-2026_en). 
Source: Eurostat 

104 

27.45.953.812.4-0.66.5480.06.92.5144.126.319.927.342.85.743.83.3Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2025)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2025)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2025)Self-reported unmet need for medical care (% of the population aged 16+, 2025)Disability employment gap (percentage points, population aged 20-64, 2025)Housing cost overburden (% of the total population, 2025)Adult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2025)Young people not in employment, education or training(% of the population aged 15-29, 2025)Gender employment gap(percentage points, population aged 20-64, 2025)Income quintile ratio (S80/S20, 2025)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2025)Employment rate(% of the population aged 20-64, 2025)Unemployment rate(% of the active population aged 15-74, 2025)Long term unemployment(% of the active population aged 15-74, 2025)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2025) 
 
 
 
  
 
 
ANNEX 15: HEALTH AND HEALTH SYSTEMS 

while 

boosting 

Lithuania’s  health  system  faces  challenges 
that  need  to  be  addressed  to  improve  the 
health  of  its  population,  social  fairness  and 
productivity, 
the 
its  economy.  These 
competitiveness  of 
challenges include: (i) limited access to healthcare 
with  high  unmet  needs  and  high  out-of-pocket 
(OOP)  spending;  and  (ii)  suboptimal  funding  and 
cost-effectiveness of the health system. The need 
to  provide  adequate  financing  for  healthcare,  to 
make the health system more resilient, to improve 
accessibility of primary and preventive care and to 
increase  the  availability  of  health  workers  were 
raised 
country-specific 
in 
recommendations (CSRs). 

2025 

the 

Graph A15.1: Treatable mortality 

Age-standardised death rate - mortality that could be avoided 
through optimal quality healthcare. 
Source: Eurostat (indicator: hlth_cd_apr) 

Life expectancy at birth in Lithuania was still 
among  the  lowest  in  the  EU  in  2024,  and 
2023  avoidable  mortality  –  preventable  or 
treatable  – was among the highest. Lithuania 
recorded the highest increase in life expectancy in 
the  EU  between  2019  and  2024.  Life  expectancy 
for  women  was  8.6 years  higher  than  for  men  in 
2024.  Unlike  in  other  EU  countries,  women  can 
also  expect  to  live  considerably  longer  in  good 
health  (around  four  years  longer  than  men).  In 
2023,  treatable  mortality  was  among  the  highest 
in 
the 
effectiveness  of  the  health  system.  Diseases  of 
the  circulatory  system  –  cardiovascular  diseases 
(CVDs)  –  and  cancer  are  the  leading  causes  of 
death,  with  the  former  accounting  for  more  than 
half  of  all  deaths  in  Lithuania  in  2023,  the  latter 
21%. The CVD  death rate was particularly high in 
Lithuania  (more  than  twice  the  EU  average). 
Potentially  avoidable  hospital  admissions  are  one 

the  EU,  suggesting  shortcomings 

in 

and 

(248). 

diabetes 

Lithuania 

of  the  highest  in  the  EU  for  congestive  heart 
is 
failure 
implementing  disease  cluster  models  to  improve 
coordination  and  quality  of  care.  The  country 
participates in the joint action EUnetCCC funded by 
EU4Health,  aimed  at  strengthening  cancer  care 
(249).  Lithuania  also  benefits  from  EU4Health 
grants to set up networks for cancer infrastructure 
and expertise. 

Suicide  rates  remain  high.  Even  though  the 
suicide  rate  decreased  by  almost  half  between 
2013  and  2022,  it  remains  one  of  the  highest  in 
the EU. Since mid-2025, several new services have 
been introduced in mental health centres providing 
outpatient  mental  healthcare  services.  Access  to 
mental  healthcare  services,  including  for  children 
and  adolescents,  has  been  expanded  and 
additional funding has been allocated. Lithuania is 
also 
the 
implementing  an  action  plan  for 
development  of  mental  health  promotion, 
psychosocial  support  and  suicide  prevention 
interventions  for  2025–2027.  Community-based 
treatment  teams  are  also  being  set  up  with  EU 
structural funds.  

Preventable  mortality  remains  very  high. 
Lithuania  has  increased  investment  in  disease 
prevention  over  the  last  10 years,  from  a  1.8% 
share  of  spending  in  2014  to  2.8%  in  2023,  but 
this  share  remains  well  below  the  EU  average  of 
3.7%.  Despite  a  23%  decrease  over  2014-2023, 
preventable  mortality  rates  remain  one  of  the 
highest in the EU.  

Preventable  mortality  in  Lithuania  is  closely 
(250). 
linked  to  behavioural  risk  factors 
Smoking  and  alcohol  consumption  rates  among 
Lithuanian  adults  remain  higher  than  the  EU 
averages.  E-cigarettes  have  become  widespread 
particularly among Lithuanian adolescents, despite 
a ban on sales, possession and use among minors 
(251). Lithuanian adults also have one of the lowest 
consumption  levels  of  fruit  and  vegetables  in  the 

(248) OECD (2025), Health at a Glance 2025: OECD Indicators. 

(249) EUnetCCC JA - The European Comprehensive Cancer Centre 

Network. 

(250) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Lithuania. State of 
Health in the EU. 

(251) ESPAD Group (2025), Key findings from the 2024 European 
School Survey Project on Alcohol and Other Drugs (ESPAD), 
Lisbon: European Union Drugs Agency. 

105 

202.0181.0199.7190.9183.4163.394.889.291.793.389.786.8201420192020202120222023per 100 000 populationLithuaniaEU 
 
      
 
 
 
EU. Lithuanians also have among the lowest levels 
of physical activity outside working time in the EU. 
More  than  half  of  adults  have  less  than  one 
physical  activity  outside  working  time  in  a  typical 
week. Poor dietary habits translate into high rates 
of  obesity:  20%  of  the  population  was  obese  in 
2022. The high prevalence of risk factors and the 
over  40%  increase  in  cancer  prevalence  between 
2010 and 2020 underscore the need to strengthen 
prevention  efforts  (252).  Lithuania  has  launched 
several EU-funded projects to address risk factors. 
For 
literacy  project 
the  health 
strengthens  healthy  nutrition  and  oral  hygiene 
skills  and  promotes  vaccination  and  first-aid 
training. The Institute of Hygiene is also organising 
health promotion programmes for parents entitled 
‘The Incredible Years’ and ‘Growing Through Play’.  

example, 

Graph A15.2: Potential gains in working-life years from 
prevention, between 2022 and 2040 

Source: EC/OECD, State of Health in the EU: 2025 Synthesis 
Report 

Poor  health  outcomes  negatively  affect 
Lithuania’s workforce and hence productivity 
and  competitiveness.  In  Lithuania,  mortality  at 
working  age  as  a  proportion  of  total  mortality  is 
among  the  highest  in  the  EU  (21%  vs  14%  EU), 
exacerbating the effects of population ageing on a 
shrinking  labour  force  (see  Annex 11).  Gains  in 
health  status  from  further  prevention  investment 
could 
regards 
is 
diseases 
non-communicable 
estimated  that  up  to  80%  of  CVDs  and  type  2 
diabetes  in  the  world,  up  to  half  of  cancer  cases, 
and  most  chronic  lung  diseases  can  be  prevented 
(253). For example, preventing all deaths from NCDs 
in Lithuania – in particular CVDs – would result in 
a  1.7%  gain  in  working-life  years  from  2022  to 

impact.  As 

alleviate 

(NCDs), 

this 

it 

save 

States 

and  would 

2040 (vs 0.9% for the EU, see Graph A15.2). This 
is  one  of  the  highest  potential  increases  across 
Member 
about 
438 000 life  years  in  Lithuania  over  2022-2040. 
This 
increase  would  mitigate  an  otherwise 
expected  12%  reduction  of  the  workforce  due  to 
demographic  ageing  of  the  2022  population  (7% 
for  the  EU) (254).  Lithuania is  implementing  health 
centres in 52 municipalities, which aim to improve 
the quality and accessibility of healthcare services 
for patients with one or more chronic NCDs. 

The  functioning  of  the  health  system  is 
hampered  by  relatively  low  public  spending 
and  reliance  on  OOP  payments.  While  health 
spending  per  inhabitant  in  Lithuania  (adjusted  for 
differences  in  purchasing  power)  almost  doubled 
over the preceding decade, it still remained below 
the  EU  average  in  2023.  The  largest  share  of 
Lithuania’s  health  spending  is  on  outpatient  care 
(close to a third of total health expenditure), while 
more  than  a  quarter  of  it  goes  on  hospital 
services.  Medical  goods  (retail  pharmaceuticals 
and  therapeutic  appliances)  accounted  for  the 
same  amount  of  health  spending  as  hospital 
services.  Public  spending  as  a  proportion  of  total 
health  expenditure  was  below  the  EU  average  in 
2023 (67.3% vs 80.6% in the EU on average). This 
the  highest  proportion  of 
translates 
households’  OOP  payments  for  healthcare  in  the 
EU  (31%  in  2023,  more  than  double  the  EU 
average  –  see  Annex 12).  Pharmaceuticals  and 
dental care each account for approximately a third 
of  OOP  payments.  Private  spending  on  outpatient 
medical care accounts for 13% (255). In 2025, in an 
effort  to  reduce  OOP  payments,  the  government 
initiated legislative amendments introducing a ban 
on charging co-payments for services financed by 
the compulsory health insurance fund. 

into 

Lithuania’s  pharmaceutical  sector 
is  of 
comparatively modest economic significance. 
The  number  of  clinical  trials  is  low  and  has  been 
steadily decreasing since 2015 (256). Lithuania has 
only  granted  few  patents  for  pharmaceuticals  in 
recent  years,  and  its  industry  has  a  consistently 
low  share  of  extra-EU  exports  (3.7%  in  2025  vs 
13.9% for the EU average). 

(252) Country Health Profile 2025: Lithuania - see earlier footnote. 

(253) NCD Alliance, 2025: Noncommunicable Diseases (NCDs) 

(254) EC/OECD, State of Health in the EU: 2025 Synthesis Report. 

(255) Country Health Profile 2025: Lithuania - see earlier footnote. 

overview | NCD Alliance. 

(256) US National Library of Medicine, https://clinicaltrials.gov. 

106 

0.7%0.5%0.9%0.3%0.1%0.1%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%LithuaniaEUCancerCVDDiabetes and chronic lower respiratory disease 
      
 
 
Table A15.1:  Key health indicators 

*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used based on 2023 data (or latest available). Doctors’ density data refer to practising doctors in all countries except 
Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data refer to practising nurses (EU 
recognised qualification) in most countries except Portugal (licensed to practice) and Slovakia (professionally active). Latest data 
update on nurses for Belgium and Sweden: 2022; for France: 2021; for Luxembourg: 2017. 
** latest available 10-year trend: ratio 2023/2014 or 2024/2013; a factor of 2.00 means that it has doubled in 10 years. 
***‘Available hospital beds’ covers somatic care, not psychiatric care. 
Source: Eurostat 

Relative  to  population  size,  the  number  of 
hospital  beds  in  Lithuania  was  high in  2023. 
Meanwhile,  the  occupancy  rate  in  2023  was 
relatively  low  (61%).  Diabetes  hospital  admission 
rates  were  high.  Lithuania  has  consistently 
underinvested in the health sector, recording some 
of  the  lowest  levels  of  health  infrastructure 
investment  per  capita  in  the  EU  since  at  least 
2015. This is reflected in the low availability of key 
diagnostic  technology:  Lithuania  has  one  of  the 
lowest  rates  of  gamma  cameras  and  positron 
emission tomography (PET) scanners per capita in 
the EU. Lithuania spends a fifth of its 2023 share 
of  health  expenditure  on  primary  care.  The 
country’s  estimated  domestic  spending  per  capita 
on  prevention,  preparedness  and  response  is  one 
of  the  lowest  in  the  EU  (257).  The  2025  CSR 
highlighted  the  need  to  make  the  health  system 
more  resilient.  Lithuania  is  currently  investing  in 
modernising the infrastructure of two hospitals to 
ensure  continuity  of  operations  in  emergency 
situations.  Other  measures  are  also  focusing  on 
strengthening resilience to emergencies, crises and 
military  threats.  The  recovery  and  resilience  plan 
(RRP)  is  funding  the  ongoing  construction  of 
advanced  therapy  centres, 
infectious  disease 
cluster 
centres  and  modernised  healthcare 
facilities  in  hospital  emergency,  resuscitation  and 
intensive care units. 

Significant 
challenges  hamper  optimal 
access to healthcare, in particular in remote 

(257) OECD Health Statistics 2025. 

areas.  In  2024,  the  proportion  of  the  Lithuanian 
population reporting unmet needs for medical care 
was  high  (4.3%  vs  2.5%  EU,  see  Annex 17).  This 
also  varies  significantly  by  region  (see  Annex 18). 
The  primary  reasons  reported  are  long  waiting 
times. Lithuania has among the highest shares of 
people with medical needs reporting foregone care 
in  the  EU.  Unmet  needs  for  primary  care  are 
double  the  EU  average,  which,  combined  with  the 
high  number  of  hospital  beds,  points 
to 
inefficiencies  in  the  healthcare  system.  Lithuania 
is  enhancing 
the  qualifications  of  primary 
healthcare 
healthcare 
professionals  to  address  the  need  –  as  identified 
in  the  2025  CSR  –  to  improve  the  quality  and 
accessibility of healthcare services. Moreover, new 
specialist  remote  consultation  services  are  being 
developed  and  introduced  to  strengthen  primary 
healthcare capacities and improve patient referral 
processes.  Lithuania  also  aims  to  reduce  waiting 
times  and  address  unmet  medical  needs  by 
implementing  several  strategic  initiatives  focused 
on strengthening the role and autonomy of nurses 
within  the  health  system.  The  second  reason 
limiting  access 
financial,  given 
to  care 
households’ high OOP payments for healthcare.  

specialised 

and 

is 

Workforce ageing and regional imbalances of 
health  professionals  add  to  concerns  about 
the  availability  of  healthcare.  The  density  of 
doctors and nurses in Lithuania is close to the EU 
average  (see  Table A15.1).  However,  workforce 
renewal  is  a major  concern  for  nurses.  More  than 
half of nurses were over 55 years of age in 2022. 
Moreover, fewer than 20% were under 44 years of 

107 

2020202120222023202410-year change**EU average* (latest year) Cancer mortality per 100 000 population276.5259.4261.5255.1n.a.0.92233.1 (2023)Mortality due to circulatory diseases per 100 000 population 793.5 800.7 784.5 658.5n.a.0.78313.0 (2023)Current expenditure on health, purchasing power standards, per capita2 0112 3102 3162 4152 6351.883834.9 (2023)Public share of health expenditure, % of current health expenditure 70.2 68.8 66.5 67.3 66.91.0080.6 (2023)Spending on prevention, % of current health expenditure 3.95.64.72.8n.a.1.533.7 (2023)Available hospital beds per 100 000 population*** 512 517 485 472n.a.0.73440 (2023)Doctors per 1 000 population*4.54.54.44.6n.a.1.034.3 (2023)*Nurses per 1 000 population* 7.8 7.9 7.5 7.5n.a.0.947.6 (2023)*Mortality at working age (20-64 years), % of total mortality22.421.921.222.221.90.8914.3 (2023)Consumption of antibiotics in the community and hospital sectors,      defined daily doses per 1 000 inhabitants 14.2 14.1 18.5 18.7 19.71.2820.3 (2024) 
 
 
      
 
Lithuania’s health sector, potentially improving the 
effectiveness  of  and  access  to  healthcare,  are 
planned  under  the  2021-2027  cohesion  policy  or 
as  part  of  the  RRP.  The  RRP,  for  example,  funds 
additional  modules 
emergency 
and 
management 
modernisation of the state information system on 
infectious  diseases  to  be  achieved  by  April  2026. 
Also,  under  EU4Health  Lithuania  receives  direct 
grants to expand its digital infrastructure.  

for 
information 

system 

the 

age.  Regarding  doctors,  uneven  geographical 
distribution  limits  access  to  care,  with  higher 
concentrations  of  doctors  in  the  Vilnius  and 
Kaunas districts (see Annex 18). The remuneration 
of  general  practitioners  is  also  relatively  low. 
factors  combined  pose  a  significant 
These 
challenge  to  the  long-term  accessibility  of  health 
services,  as  well  as  the  level  of  capacity  required 
to meet the demand for healthcare. Lithuania has 
invested  in  addressing  these  imbalances  between 
health  professionals,  with  the  number  of  nursing 
graduates  doubling  between  2014  and  2023. 
However,  the  numbers  of  nursing  graduates  still 
lag far behind the EU average. The nurse-to-doctor 
ratio  target  of  2:1  under  the  national  health 
strategy  is  unlikely  to  be  met  due  to  ongoing 
recruitment  and  retention  challenges  (258). 
In 
October  2025,  a  sectoral  collective  agreement 
committed  to 
the  remuneration  of 
healthcare  professionals,  with  priority  given  to 
nurses’  wages.  The  EU-funded  Training  and 
Attraction of Health Professionals project launched 
in  Q1-2025 
in 
being 
53 municipalities.  It  is  planned  to  attract  more 
than  1 600 specialists  to  healthcare  institutions. 
Lithuania  is  also  in  the  process  of  creating 
additional  state-funded  residency  study  places  in 
regional  healthcare  institutions  and  increasing 
their  remuneration.  These  measures  may  help 
address  the  2025  CSR to increase  the  availability 
of  health  workers.  Lithuania  participates  in  the 
EU4Health-funded  HEROES  joint  action,  through 
which  EU  countries  share  expertise  on  health 
workforce planning (259). 

increase 

carried 

out 

is 

Lithuania’s  health  system  is  a  top  runner  in 
digitalisation  but  suffers  from  a  digital 
divide  in  the  population.  The  shares  of  people 
accessing their personal health records online and 
using  online  health  services  (excluding  phone) 
instead  of  in-person  consultations  are  well  above 
the  EU  average  and  more  than  doubled  between 
2020 and 2024 (see Annex 7). However, Lithuania 
has  among  the  widest  digital  divides  in  the  EU: 
significant  differences  were  observed  in  patient 
use  according 
socio-economic 
background.  This  concerns  both  accessing  health 
services online and using electronic health records. 
Digital  literacy  –  meaning  people’s  basic  digital 
skills  –  in  Lithuania  is  below  the  EU  average. 
Investments to boost the digital transformation of 

people’s 

to 

(258) Country Health Profile 2025: Lithuania - see earlier footnote. 

(259) JA HEROES | Health Workforce Planning Project. 

108 

 
 
ANNEX 16: HOUSING 

is  very 

The  2025  country-specific  recommendation 
highlighted the need to ‘make buildings more 
energy  efficient  to  reduce  energy  poverty’. 
Despite  improvements,  and  the  targeting  of  EU 
funds  towards  the  energy  efficiency  of  housing, 
many homes still lack basic amenities and energy 
performance 
low.  Russia’s  war  of 
aggression  against  Ukraine  and  the  2022-2023 
energy  crisis  that  followed  mean  households  are 
under  additional  strain  and  affordability  for 
vulnerable households has worsened. Even though 
energy  prices  fell  in  2024  and  the  first  half  of 
2025, the recent VAT rate increase on heating and 
hot water costs, as well as the ongoing increase in 
gas  prices  due  to  the  Iran  conflict,  could  reverse 
these trends in 2026. 

The  2025  country-specific  recommendation 
emphasised the  need  to  ‘improve the  access 
and  quality  of  social  housing’.  The  social 
housing  sector  remains  limited,  and  waiting  lists 
long  and  growing,  such  that  low-income  and 
vulnerable groups have great difficulties accessing 
social  housing.  The  private  rental  market  remains 
largely  informal  despite  efforts  to  expand  the 
formal  market.  Recent  efforts  and  EU  funding  for 
social housing should improve the situation. 

In  this  context, 
low  average  household 
expenditure  on  housing  hides  an  emerging 
affordability  crisis  in  Lithuania.  The  high  rate 
of  homeownership  without  a  mortgage  keeps 
average  housing  expenditure  at  low  levels,  but 
many homeowners are poor and cannot afford the 
necessary  upgrades  of  their  dwelling.  Rising 
construction  costs  make  new  and  quality 
accommodation 
less  affordable  for 
households  entering  the  housing  market  through 
rental or purchase, or wishing to move to a higher 
quality home. 

less  and 

Housing market developments 

to 

House  prices  have  continued 
rise 
significantly over the past decade, supported 
by  rising  incomes  and  favourable  financing 
conditions (see Graph A7.1). Nominal  house price 
growth  peaked  at  19.0%  year-on-year  in  2022, 
before  decelerating  to  9.8%  in  2023 and  9.7%  in 
2024,  driven  by  a  slowdown  in  demand  due  to 
higher interest rates. Since then, mortgage interest 
rates  have  declined,  and  lending  volumes  have 

expanded even though they remain below the Euro 
Area average. In 2025, nominal house prices grew 
steadily  by  9.8%  year-on-year,  and  they  show 
signs  of  overvaluation  of  around  18%  (based  on 
the standard European Commission methodology). 
income 
House 
developments in 2009–2024, causing the price-to-
income  ratio  to  remain  broadly  stable  with  mild 
increase  above  its  long-term  average  recorded  in 
recent years. 

household 

tracked 

prices 

in 

house 

disparities 

Regional 
price 
levels remain pronounced.  Prices  are highest in 
higher-than-average 
Vilnius 
incomes, the  size  of 
the  dwelling  that  can 
be purchased with  one  third  of  disposable  income 
is half of what can be bought in other regions. 

despite 

and, 

Graph A16.1: House prices, rents and price-to-income evolution 
in LT and EU27 since 2005 

Source: Eurostat 

the 

outside 

remains 

particularly 

rental  market 

thin and 
The 
concentrated in Vilnius, where rising demand 
has  pushed  up  rent  prices.  With  tenants 
representing  a  mere  12.6%  of  the  population  in 
2024,  and  only  2.9%  of  them  paying  rent  at 
market  conditions,  the  rental  market  in  Lithuania 
is limited, 
capital 
region. Informal  leases  continue  to  be  pervasive, 
especially  outside  the  big  cities.  Due  to  limited 
supply, 
in  2010–2025,  Lithuania  recorded  a 
nominal  rent increase  of about  191.1% (including 
standing  and  new  rental  contracts). The  year-on-
year  rental  price  increase  was especially  high  in 
2022,  reaching  16.1%,  as  a  large  inflow  of 
Ukrainian  refugees  in  Lithuania  drove  up  rental 
rental  prices 
demand. Overall,  even 
increased  sharply,  the  increase  broadly  matched 
disposable income growth, and the rent-to-income 
ratio remained fairly stable. 

though 

109 

501001502002503003504004500507091113151719212325Index (2005 = 100)Nominal prices LTNominal prices EU27Rental prices LTRental prices EU27Price-to-income ratio LTPrice-to-income ratio EU27 
 
      
 
 
Following  a  period  in  which  the  construction 
of  new  dwellings  increased  in  response  to 
rising  house  prices,  it  has  recently  declined. 
After  falling  steeply  in  2009-2012,  investment  in 
dwellings grew sharply until Q12023 (Graph A7.2) 
in  response  to  fast  price  growth,  as  profitability 
rose.  The  issuance  of  residential  building  permits 
also increased, especially in 2019-2021. However, 
since then,  completions  have been  constrained  by 
labour  shortages, 
increased construction  costs, 
more stringent financing conditions for developers, 
(see Annex 5). As a result, the investments in new 
dwellings  and  the  issuance  of  building  permits 
have been declining over the last few years.  In the 
medium run, decreases in population will result in 
limited construction needs outside the main cities. 
Vacant housing, today lower than the EU average, 
can be expected to rise in that context. 

Mortgage 
interest  rates  have  remained 
relatively  high  over  the  past  decade  (261).  In 
2019–2021,  mortgage  interest  rates  fluctuated 
between  2.1%  and  2.4%,  significantly  above  the 
euro  area  average.  Following  the  monetary  policy 
tightening  cycle  and  given  the  high  prevalence  of 
variable-rate 
increased 
sharply,  reaching  5.8%  in 2023.  The  housing  cost 
overburden rate almost doubled for owners with a 
mortgage,  from  2%  in  2022  to  3.8%  in  2025,  vs 
5%  in  the  EU.  As  a  result,  demand  for  mortgage 
lending in Lithuania remains subdued.  

loans,  mortgage  rates 

Graph A16.3: Borrowing costs and housing loans, in LT and EA 
since 2018 

certain 

shortages 

Despite  a  low  job  vacancy  rate,  Lithuania 
skilled 
in 
faces 
occupations within the construction industry. 
While  the  job  vacancy  rate  in  the  construction 
sector was significantly lower than the EU average 
in 2025 (1.5% vs 2.8%), Lithuania has a shortage 
of  workers  in  some  occupations  related  to  the 
construction sector. For example, labour shortages 
are  reported  for  bricklayers,  building  electricians, 
concrete  placers  and  finishers,  crane  and  related 
plant operators (260). 

Graph A16.2: House supply indicators in LT since 2005 

Source: Eurostat 

Source: Eurostat and ECB 

Structural policies 

Changes  in  governance  and  the  upcoming 
strategy  for  housing  could  make  for  more 
ambitious  housing  policies  and  more 
effective  implementation.  In  response  to  the 
fragmentation  of  governance  pointed  out  in  the 
2023  OECD  report  Policy  Actions  for  Affordable 
Housing  in  Lithuania,  the  Ministry  of  Environment 
has been assigned the role of coordinating housing 
policies across government. A housing affordability 
assessment  is  being  carried  out  to  provide  the 
basis for a national  housing affordability strategy 
which should be adopted by the end of 2026. This 
will replace the national housing strategy adopted 
in  2004  and  not  updated  since.  A  law  on  support 
for housing acquisition or rental is also planned for 

(260) EURES-Report on labour shortages and surpluses 2024. 

(261) European Commission 2025. Taxing Bank Windfall Profits: 

Lessons from the Baltics - Economy and Finance. 

110 

01122334455070901101301501701902102302500507091113151719212325% of GDPIndex (2005 = 100)Residential building permits in m2, indexResidential buildings producer prices, indexInvestment in dwellings (right-hand side axis)0123456781819202122232425in % (interest rates) or in % of GDP (loans)Interest rates LTInterest rates EAPure new loans LTPure new loans EA 
      
 
     
 
2026 covering, among other things, purchase and 
rental  support,  quality  requirements  for  social 
housing  and  the  protection  of  older  tenants  and 
tenants  with  disabilities.  In  the  meantime,  the 
state budget for housing remains small compared 
with  other  EU  countries.  Responsibility  for  the 
implementation  of  housing  policies  has  been 
transferred  to  municipalities,  but  their  technical 
and  financial  constraints  affect  the  scale  and 
speed of affordable and social housing provision.  

and 

administrative 

The 
regulatory 
environment  is  favourable  to  construction. 
The quality of the land administration was ranked 
one  of  the  highest  in  the  EU,  and  construction 
procedures  are  among  the  fastest  in  Europe  (262). 
The  2023  Construction  Law  simplified  and 
digitalised  permitting  by  reducing  the  project-
design  stages  and  cases  where  a  formal  permit 
is required  and  extending  the  use  of  electronic 
systems. State-owned land is being transferred to 
municipalities 
to  support  affordable  housing 
development,  with  more  than  900 000 ha  being 
transferred in 2024 and 2025. 

Social  housing  in  Lithuania  remains  very 
limited,  despite  recent  measures  to  address 
the  2025  country-specific  recommendation 
to  improve  access  to  and  quality  of  social 
housing. The approximately 13 000 social housing 
units  owned  and  operated  by  municipalities 
represent 0.8% of the country’s housing stock. The 
upcoming  law  on  support  for housing acquisition 
or  rental  will  set  basic  quality  and  safety 
requirements  for  social  housing  that  do  not  yet 
exist.  This  step  has  been  praised  by  NGOs  which 
constantly  report  on  the  overall  low  quality  of 
social  housing,  of  which  2.5%  is  in  emergency 
condition. The development of social housing stock 
in 2021-2027 is financed by European funds, with 
an initial allocation of ca EUR 85 million (including 
the national contribution), with a target of ca 2060 
users,  mainly  persons  with  disabilities  and  large 
families.  Following  the  mid-term  review,  an 
additional  EUR  53  million  from  European  funds 
were  allocated  (EUR  69  million  together  with  the 
national  contribution)  for  the  development  of  the 
additional social housing stock for ca 1 790 users, 
making  it  ca  3850  users  and  ca  EUR  155  million 
(with  national  contribution) 
in  total  for  the 
development  of  social  housing.  Furthermore, 

additional  EUR  35  million  is  allocated  from  the 
Social  Climate  Plan  for  the  construction  or 
purchase of 278 social housing units by Q3 2032. 
According  to  Lithuania’s  estimates  approximately 
EUR 1  billion  would be  needed  to meet  the  entire 
current demand for social housing. 

With  policies  encouraging  homeownership, 
the private rental market is thin and suffers 
from  a  high  level  of  informal  contracts.  In 
2024,  87.4%  of  the  population  lived  in  a  home 
they owned. This is due to both historical  reasons 
and  policies  that  have  traditionally  favoured 
homeownership  (see  Annex  3).  Several  support 
schemes exist to encourage homeownership for: (i) 
low-income  young  families  buying  their  main 
residence;  and  (ii)  young  families  in  rural  areas. 
These policies could in some instances lead to an 
increase in housing prices by fuelling demand. The 
informal  rental  market  is  estimated  to  represent 
between  20%  and  80%  of  the  private  rental 
market  (263).  This  reduces  tax  revenues  for  the 
state but also limits tenant protection. A system of 
business  certificates  was expanded  to  encompass 
the  activity  of  renting  out  housing  to  encourage 
landlords  to  formalise  their  rental  contracts  in 
exchange  for  reduced  income  taxes.  Its  take-up 
rate  doubled  between  2020  and  2024,  and 
accordingly  tax  declarations  of  rental  income  are 
on the rise. 

Upgrading the private housing stock is one of 
the  major  challenges  facing  the  housing 
sector. 80% of the housing stock was built before 
1993, when standards and quality were lower. The 
lack  of  a  legal  framework  for  managing  multi-
apartment  buildings  after  their  privatisation  also 
led to significant maintenance gaps. Around three 
quarters of multi-apartment buildings, and 60% of 
single-family  homes  have  a  very  low  energy 
efficiency rating (264). While there have been great 
improvements in the last 10 years, in 2023, 5% of 
dwellings still did not have a flush toilet and 5.5% 
lacked  a  bath  or  shower;  well  above  the  EU 
averages of respectively 1.8% and 1.7%. 

Support  programmes  for  housing  renovation 
and  retrofitting  exist  but  have  not  yet 
managed to fully address the 2025 country-

(263) OECD 2023. Full Report: Policy Actions for Affordable 

Housing in Lithuania | OECD 

(262) Housing in the European Union: Market Developments, 
Underlying Drivers, and Policies - Economy and Finance 

(264) Ibid.  

111 

 
 
 
specific  recommendation  make  buildings 
more  energy  efficient  to  reduce  energy 
poverty.  The 
flagship  programme  provides 
homeowners  in  multi-apartment  buildings  with 
grants,  interest  compensation,  concessional  loans 
and technical assistance for renovation (see Annex 
9).  These  programmes  are  supported  by  cohesion 
policy  funds  and  Recovery  and  Resilience  Facility 
funds.  Two  European  Regional  Development  Fund 
and  Cohesion  fund  financial  instruments  of  more 
than EUR 330 million provide loans for renovating 
multi-apartment  buildings, 
supplemented  by 
Recovery and Resilience Facility grants which cover 
around  30%  of  renovation  costs  and  100%  of 
technical  preparations.  There  have  been  several 
iterations  of  this  programme,  which  started  in 
2005.  However,  despite  efforts,  as  of  2020,  only 
8% of the 37 136 multi-apartment buildings built 
(265). 
before  1993 
Approximately  300  buildings  are  renovated  each 
for 
leaving  many  buildings  waiting 
year, 
improvements.  Additional  EUR  269  million  from 
the  Social  Climate  Fund  is  allocated  for  the  50-
80% reimbursement of the loan for full renovation 
or  75-85%  reimbursement  of  the  loan  for  partial 
renovation  of  multi-apartment  buildings.  Ca  EUR 
100  million  is  also  allocated  for  full  and  partial 
renovation of single and double-dwelling houses. 

renovated 

been 

had 

Vulnerable groups 

Vulnerable  groups  continue  to  be  heavily 
affected by the increasing housing costs, and 
their  situation  is  aggravated  by  the  poor 
housing  quality.  A  sharp  increase  in  energy 
prices in 2022 and 2023, when electricity and gas 
prices  doubled,  resulted  in  a  steep  rise  in  the 
housing  cost  overburden  rate  in  2023  and  2024 
(266),  despite the  state’s  efforts  to  cap  the  energy 
prices  and  apply  a  zero  VAT  rate  for  gas  and 
heating.  A  drop  in  energy  prices  in  2024  and  the 
first  half  of  2025  provided  some  relief  to  the 
population at risk of poverty, resulting in the drop 
of  housing  cost  overburden  rate  from  22.5%  in 
2024 to 20.2% in 2025 (29.1% in the EU), still up 
from  the  pre-pandemic  level  of  19.8%  in  2019 

(265) Ibid. 

(266) The income reference years for the 2023 and 2024 housing 
cost overburden rate are 2022 and 2023 respectively, precisely 
the years when the energy crisis took place. 

and  14.2%  in  2022.  However,  the  housing  cost 
overburden  for  tenants  renting  at  market  price 
increased  in  2025  to  27.4%.  The  housing  cost 
overburden  rate  is  higher  outside  the  capital 
region than in it (6.1% vs 4.8%) and in towns and 
rural areas (8.1% and 6.4% vs 4.3% in the cities), 
where  income  levels  are  generally  lower  and 
poverty levels higher. While housing quality is poor 
overall,  it  is  worse  for  people  at  risk  of  poverty, 
with  31.6%  of  the  population  at  risk  of  poverty 
unable  to  keep  their  home  adequately  warm  in 
2025  (EU  average  19.6%).  The  drop  in  energy 
prices in the first half of 2025 is likely to provide 
some  relief  to  the  housing  cost  overburden  rate 
for  2026.  However,  the  future  situation  is  less 
clear,  as  the  increase  in  VAT  for  heating  and  hot 
water from 9% to 21% as of 2026 (see Annexes 3 
and  12),  together  with  the  record  cold  winter 
months,  has  pushed  up  energy  costs.  The  recent 
conflict in Iran could further exacerbate the issue. 
While  the  existing  allowance  scheme  for  low-
income  households  will  alleviate  the  increase  in 
their  heating  and  hot  water  bills  to  some  extent, 
the  situation  will  still  differ  across  low-income 
energy 
households 
consumption, household size and income level. 

depending 

their 

on 

in 

2023). 

The  growing  demand  for  social  housing 
highlights the significant challenges faced in 
addressing  the  needs  of  vulnerable  groups. 
The  number  of  households  waiting  for  social 
housing has been steadily rising. In 2025, 10 750 
families  were  waiting  for  social  housing,  an 
increase from 10 378 families in 2024 and 9 975 
families in 2023. The average waiting time varied 
from 2 to 13 years across municipalities in 2024, 
with the average of 5.63 years (down slightly from 
5.74 
in  many 
municipalities, social housing is not adapted to the 
needs of people with disabilities, nor is it suitable 
for  families  with  three  or  more  children.  The 
possibility  to  rent  housing  on  the  private  market 
and  get  rent  compensation  from  the  municipality 
is  used  relatively  rarely,  with  only  about  3  000 
individuals  benefiting  from  it  in  2025,  mostly  in 
big cities. In the context of a large informal rental 
market, the requirement of having a formal lease 
contract  could  limit  the  uptake  of  these  housing 
allowances,  especially  in  rural  areas  where  the 
rental market is particularly thin. 

Furthermore, 

112 

 
 
Graph A16.4: Housing affordability selected indicators 

Source: Eurostat and European Commission calculations 

Homelessness is increasing, in the absence of 
a national strategy addressing homelessness 
and  housing  exclusion.  In  2023,  more  than 
6 000  people  stayed  in  a  shelter  or  temporary 
housing  managed  by  social  service  providers  (), 
which  was  more  than  in  2022  (267).  Shelter  and 
temporary  housing  are  provided  by  NGOs  and 
municipalities,  but  no  national  strategy  exists  to 
address homelessness. 

(267)OECD 2023. Full Report: Policy Actions for Affordable 

Housing in Lithuania | OECD  

113 

 
 
 
 
HORIZONTAL 
ANNEX 17: SUSTAINABLE DEVELOPMENT GOALS 

social 

fairness 

This  annex  assesses  Lithuania’s  progress  on 
the  sustainable  development  goals  (SDGs) 
along  the  dimensions  of  competitiveness, 
and 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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 
the EU. 

Lithuania  performs  well  on  SDG 4  but  still 
needs to improve on SDGs 8 and 9 related to 
competitiveness.  The  percentage  of  young 
people neither in employment nor in education and 

Graph A17.1: Progress towards the SDGs in Lithuania 

training (SDG 8) increased from 10.9% in 2019 to 
12.4%  in  2025,  above  the  EU  average  of  11%. 
Lithuania has slightly increased its gross domestic 
expenditure  on  R&D  (SDG 9),  which  rose  from 
0.99% of GDP in 2019 to 1.04% of GDP in 2025, 
but it remains below the EU average of 2.24%. The 
country  is  also  still  lagging  behind  on  patent 
the  European  Patent  Office 
applications 
(SDG 9),  with  32  applications  per  million 
inhabitants  in  2025  (EU  average:  156).  Several 
reforms  and  investments  in  the  recovery  and 
resilience  plan  (RRP)  focus  on  further  developing 
digital infrastructure and equipment and improving 
the  quality  of  education  and  digital  skills  at  all 
levels. 

to 

On  sustainability,  Lithuania  is  performing 
well  on  SDGs 6  and  11.  Pesticides  in  rivers 
exceeding the threshold fell from 10% in 2018 to 
0% in 2023, well below the EU average (23.3%) in 
2023 
of 
Lithuania’s 
renewable  energy  in  total  energy  consumption 
(SDG 7) was up from 25.5% in 2019 to 35.4% in 

percentage 

(SDG 6). 

For a detailed progress assessment towards the various SDGs, see the annual Eurostat report ‘Sustainable development in the 
European Union’; for extensive data on the short-term SDG progress of EU countries, see Key findings – Sustainable development 
indicators; for an interactive visualization of SDG progress of EU countries, see SDG country overview. 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 five or six 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 29 April 2026. Data refer mainly to the period 2019-2024 or 2019-2025. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

114 

 
 
 
 
 
 
 
25.5%  in  2019  to  25.8  in  2024  (EU  average 
21.0%).  The  Lithuanian  RRP  includes  measures  to 
reform the minimum income scheme and improve 
the  social  safety  net,  as  well  as  measures  to 
improve the resilience, accessibility and quality of 
the  quality, 
health 
affordability  and  efficiency  of  the  healthcare 
system.  

services  and 

increase 

On  macroeconomic  stability,  Lithuania  is 
improving  on  SDG 16  but  stagnating  on 
SDG 8.  The  employment  rate  (SDG 8)  is  better 
than the EU average (80%, vs 76.1% for the EU in 
2025).  Conversely,  the  long-term  unemployment 
rate has deteriorated (climbing from 1.9% in 2019 
to  2.5%  in  2025  vs  EU  average  of  1.9%).  On 
that 
SDG 16, 
perceives  the  independence  of  the  justice  system 
as  good  or  very  good  rose  from  49%  in  2019  to 
60%  in  2025,  exceeding  the  EU  average  of  54%. 
The  country’s  Corruption  Perception  Index  score 
also improved, from 60% in 2019 to 65% in 2025 
(EU average: 62%). 

the  percentage  of  population 

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

2024,  well  above  the  EU  average  of  25.2%  in 
2024.  On  SDG 11,  the  population  under  severe 
housing deprivation fell from 6.9% in 2018 to 4% 
in 2023 and now equals the EU average. 

However,  it  needs  to  catch  up  with  the  EU 
average on SDGs 7, 13, 14 and 15. On SDG 13, 
net  greenhouse  gas  emissions  fell  to  3.6%  in 
the  EU 
remaining  significantly  below 
2024, 
average  of  6.5%  (SDG 13),  but  the  average  CO2 
emissions  per  km  from  new  passenger  cars  were 
at 128.2 g in 2024, well above the EU average of 
107.9 g.  On  SDG 15,  Lithuania  has  made 
significant  efforts  to  catch  up  to  the  EU  average 
(3.7% in 2024) for the percentage of total area of 
the country affected by drought,  going from 48% 
in 2019 to 4.2% in 2024. It has also increased the 
percentage  of  terrestrial  protected  areas  from 
17.1%  in  2018  to  17.9%  in  2023,  though  this  is 
still  below  the  EU  average  of  26.4%.  Regarding 
increased  from 
SDG 15,  phosphate 
0.077 mg  PO4  per  litre  in  2018  to  0.165 mg  in 
2023 (EU average: 0.081 mg in 2023). 

in  rivers 

Lithuania  is  performing  well  on  one  SDG 
related  to  social  fairness  (SDG 4).  Regarding 
Lithuania’s performance on SDG 4, the percentage 
of  the  population  aged  25  to  34  that  attained 
tertiary  education  increased  from  55.2%  in  2019 
to  60.8%  in  2025  (EU  average:  44.8%  in  2025), 
although  further  efforts  are  needed  to  reach  the 
EU  average  on  adult  learning,  up  from  7.0%  in 
2019  to  10.4%  in  2025  (EU  average:  13.7%  in 
2025). 

It  still  needs  to  catch  up  on  several  others 
(SDGs 3,  5,  7,  10).  For  SDG 3,  healthy  life 
expectancy at birth based on self-perceived health 
increased  from  67.8  years  in  2018  to  70.4  years 
in  2023  (EU  average:  75.3  years)  and  the 
percentage  of  people  who  perceived  their  health 
as good or very good rose from 46.2% in 2019 to 
48.9% in 2024, against the EU average of 68.5%. 
Conversely,  the  percentage  of  people  reporting 
unmet need for medical care increased from 1.4% 
in 2019 to 4.3% in 2024 (EU average: 2.5%).  

It is moving away from the target for SDG 1. 
The  percentage  of  people  in-work  at-risk-of-
poverty  (SDG 1)  increased  from  7.9%  in  2019  to 
8.3% 
in  2024  (EU  average:  8.2%)  and  the 
percentage  of  the  population  overburdened  by 
housing  costs  increased  from  4.8%  in  2019  to 
6.2%  in  2024  (EU  average  8.2%).  The  risk  of 
poverty or social exclusion increased slightly from 

115 

 
ANNEX 18: COMPETITIVE REGIONS 

Regional development trends 

Graph A18.1: GDP per head (PPS, EU=100) growth, NUTS 3, 
2004-2024 

rapid 

The strong convergence of Lithuania towards 
the EU average since joining the EU co-exists 
with  greater  regional  disparities.  GDP  per 
head 
(in  purchasing  power  standard,  PPS), 
increased from 50% in 2004 to 88% in 2024. This 
immediately 
catch-up  was  particularly 
before  and  after  joining  the  EU.  It  then  slowed 
during  the  economic  and  financial  crisis  and  then 
resumed,  enabling  Lithuania  to  close  most  of  the 
initial  gap  with  the  EU.  The  capital  region  (Vilnius 
county) has consistently outperformed  the rest of 
the country, driving national convergence. It moved 
from 73% of the EU average in 2004 to reach the 
EU level by the early 2010s and stood at 133% in 
2024.  Other  regions  also  improved  substantially 
but remained below the EU average: the strongest 
performer outside the capital  was Kaunas county, 
reaching  87%  in  2024.  At  the  lower  end,  Utena 
and  Alytus  counties  have  gained  4  and  13 
percentage  points  (pps)  since  2004,  respectively, 
the  EU  average. 
both 
Marijampolė  and  Tauragė  counties,  previously  the 
poorest, increased by 18 and 25  pps respectively, 
to reach 50% and 51% in 2024 (Graph A18.1). 

reaching  48%  of 

Map A18.1: GDP per head compared with the EU average, NUTS 
2 

Source: DG REGIO based on Eurostat 

Graph A18.2: Productivity per hour worked: average annual 
growth and level, NUTS 3 

Source: Calculations by DG REGIO and the Joint Research 
Centre (JRC) based on Eurostat data 

Regional  differences  in  GDP  per  head  are 
largely  driven  by  disparities  in  productivity. 
In 2024, productivity (GDP per hour worked in PPS) 
averaged  82%  of  the  EU  average.  Vilnius  county 
(110%)  is  already  above  the  EU  average.  It  is 
followed  by  Kaunas  (78%)  and  Klaipėda  (73%) 
counties,  while  Marijampolė,  Utena,  Alytus  and 
Tauragė  counties  lagged  behind  at  60%,  which 
places  them  among  the  poorest  20%  of  all  EU 
regions  (Graph  A18.2).  Productivity  in  Vilnius, 
Kaunas  and  Tauragė  counties  has  been  growing 
faster than in the rest of the country. However, the 
country  as  a  whole  has  been  experiencing  high 
productivity  growth  at  a  rate  faster  than  the  EU 
average. 

2021-2023 average GDP per head in purchasing power 
standard compared with the EU average. 
Source: Commission calculations based on Eurostat 16 July 
2025 data 

116 

020406080100120140LithuaniaVilniaus apskritisAlytaus apskritisKauno apskritisKlaipėdos apskritisMarijampolės apskritisPanevėžio apskritisŠiaulių apskritisTauragės apskritisTelšių apskritisUtenos apskritis0.71.92.72.31.51.41.11.00.70.6-0.1-0.31007095495566565162444545EULithuaniaVilniaus apskritisTauragės apskritisŠiaulių apskritisKauno apskritisPanevėžio apskritisTelšių apskritisKlaipėdos apskritisMarijampolės apskritisUtenos apskritisAlytaus apskritisAverage annual growth2024 (%)Productivity in 2024GDP/hour, EU27 = 100 
 
 
 
 
 
   
 
   
 
Table A18.1:  Main developments, challenges and the allocation of resources 

Source: European Commission based on Eurostat data; categoriesof regions based on Map A18.1 

Regional  productivity  differences  and  trends 
can  be  explained  by  the  different  regional 
economic  structures.  Vilnius,  with  50%  of 
employment  in  knowledge-intensive  services  and 
10%  in  high-tech  sectors (268),  has  established 
itself  as  the main innovation  and  technology  hub. 
Kaunas  is  strengthening  an  innovation  ecosystem 
that  includes  universities,  research  institutes  and 
integrated science, study and business centres for 
the  development  of  chemistry,  bio-pharmacy, 
energy,  mechatronics,  IT,  agriculture  and  food. 
Industry  is  the  main  economic  driver  in  most  of 
the  remaining  regions,  particularly  in  Panevėžys 
and  Telšiai.  Klaipėda  county's  value  added  is 
mainly  generated  by  logistics  and  manufacturing 
activities  that  rely  on  its  seaport's  connectivity, 
though  the  region  has  also  started  developing  its 
innovation  and  start-up  ecosystem.  The  county 
anchors 
economy,  where 
established  sectors  directly  employed  31 900 

Lithuania's 

blue 

(268) Eurostat data, 2024. 

people and generated  approximately EUR 1 billion 
in gross value added (GVA) in 2022 (269). 

climate 

Coastal  areas 
in  Klaipėda  county  are 
increasingly  affected  by  environmental 
degradation  and 
This 
threatens  the  region’s  competitiveness  and  the 
resilience  of  fisheries  operating  in  the  Baltic  Sea 
and 
In  addition, 
aquaculture  in  Vilnius  and  Kaunas  counties  faces 
several sustainability challenges (271). 

the  Curonian  Lagoon (270). 

change. 

(269) https://blue-economy-observatory.ec.europa.eu. 

(270) https://helcom.fi/wp-content/uploads/2023/06/HELCOM-

Thematic-assessment-of-eutrophication-2016-2021.pdf. 

(271) https://aquaculture.ec.europa.eu/country-

information/lithuania. 

117 

Main development trendsLess developed region -  (population 2.02 million).The Central and Western Lithuania Region, with GDP per capita at 67% of the EU average, significantly underperforms the EU average across a wide range of economic and social indicators. In particular, weaker private and foreign investment, limited innovation capacity and demographic decline create significant barriers to the region’s convergence with the EU average. Innovation and industry activity are concentrated in Kaunas and Klaipėda, which have become important manufacturing and productivity leaders of the region. The regon's main challenge is to boost business competitivenss, promote a more even spread of innovation,  increase labour productivity and maintain growth.More developed region (population 0.87 million)The Capital region, where GDP per capita reaches 132% of the EU average, vastly outpaces the rest of the country. This region has the highest concentration of R&D investment and high-tech industry activity. The  region attracts the largest share of high-value investment, which results in the highest productivity gain. The region succeeds in maintaining modest population growth, while the rest of the country experienced a steep decline over recent decades. However, internal disparities exist between Vilnius municipality and the surrounding municipalities, which lag behind in access to public services and employment indicators. Urban sprawl of Vilnius city has led to greater car dependency, leading to higher greenhouse gas emissions and greater congestion.Territorial aspects of Lithuania’s location on the EU’s eastern borderAs a country on the eastern external border of the EU, Lithuania faces persistent and multidimensional challenges. Heightened security and hybrid threats, sustained pressure on national and regional economies, labour markets and social systems, declining investment attractiveness, social and psychological strain jointly undermine development prospects and hinder economic and social convergence. Increased defence, security and civil preparedness spending inevitably constrains investments in long-term economic, social, and territorial development, thereby affecting the competitiveness and growth potential. National cohesion aspects in accordance with Article 177 TFEU (second indent)Transport infrastructure in Lithuania is patchy – peripheral regions suffer from poor roads and limited rail connections, inadequate public transport services beyond the main urban corridor and a lack of coordinated inter-municipal transport plannin. All these issues hinder equal access to transport and opportunities across regions.  Investments in sustainable public transport infrastructure, including rail connections and clean bus services, would improve mobility for residents of smaller towns and rural areas, helping them access jobs and services.  Rail Baltica,  supported primarily from the Connecting Europe Facility, remains a flagship national project in the TEN-T network.  
 
 
 
  
 
Table A18.2:  Key regional indicators (at NUTS 3 level) for Lithuania 

Dark green – the indicator is at least 120% of the EU average. 
Light green – the indicator is at least 100% but less than 120% of the EU average. 
Yellow – the indicator is at least 90% but less than 100% of the EU average. 
Light red – the indicator is at least 75% but less than 90% of the EU coverage 
Dark red – the indicator is less than 75% of the EU average. 
This colour scale applies to ‘positive’ indicators where higher values are favourable. 
For ‘negative’ indicators (where higher values are unfavourable), the colours are reversed 
Source: Eurostat and JRC 

Key challenges for regional 
competitiveness 

Low  regional  convergence  and  existing 
structural challenges of the regions - weaker 
labour  markets,  demographic  decline,  lower 
connectivity,  urban-rural  divide  –  are 
strengthened  by  country’s  location  on  the 
EU’s  eastern  border.  Impact  from  Russia’s  war 
of  aggression  against  Ukraine  is  observed  in 
declining  investment,  weaker  business  confidence 
and the loss of trade flows and tourism markets in 
the  whole  country.  Heightened  security  concerns 
and perceptions of proximity to the conflict further 
undermine  their  attractiveness  for  workers  in  the 
border  zone. 
in 
medium-sized  cities  and  rural  municipalities  (15 
km  zone  at  the  border  with  Russia  and  Belarus) 
were 4 to 6 percentage points lower than in other 
municipalities  of  the  corresponding  type  that  are 

In  2024,  employment  rates 

distant  from  the  border(272).  Therefore,  Lithuanian 
regions face simultaneous challenge to strengthen 
security  and  resilience  while  sustaining  economic 
activity,  social  cohesion  and  the  viability  of  rural 
and border areas. 

Innovation  capacity  is  highly  uneven  across 
regions.  The  highest  concentrations  of  R&D 
investment  and  high-tech  industry  activity  are  in 
hubs like Vilnius and Kaunas, whereas many other 
areas could be considered ‘innovation deserts’ (273). 
Key  impediments  to  innovation  include  shortages 
of  specialised  R&D  staff  and 
limited  public 
awareness  of  innovation  schemes  and  scientific 
advancements (274).  These  challenges  tend  to  be 
more  acute  outside  the  main  cities,  where  there 
are few research institutions and innovative firms. 

(272) Ministry of the Interior information 

(273) OECD (2022). Regions and Cities at a Glance 2022 – 
Lithuania. Paris: OECD Centre for Entrepreneurship, SMEs, 
Regions and Cities. 

(274) Innovation Agency Lithuania (2024). Smart Specialisation 

Report 2024. Vilnius: Innovation Agency Lithuania. 

118 

GDP per head (PPS, index)Real GDP per head growthEmployment in financial and other service activitiesGrowth in natural populationNet migrationChange in working age population (20-64)Access to primary schools  - Rural areasAccess to primary schools - IntermediateAccess to healthcare - TotalEU27=100Average annual % change% of total employmentAverage annual change per 1000 residentsAverage annual change per 1000 residentsAverage annual % changeChildren under 15 within 15-minute walk to primary school (%)Children under 15 within 15-minute walk to primary school (%)Population within 10 minutes by car from nearest hospital  (%)20242014-202420242015-20242015-20242016-2025202320232023EU1001.416.3-1.73.5-2.6345368.9Lithuania873.412.5-5.74.4-3.3426066.2Sostinės regionas1333.718.0-2.111.37.7355977.9Vidurio ir vakarų Lietuvos regionas682.89.6-7.11.6-6.0446062.7Vilniaus apskritis1333.718.0-2.111.37.7355977.9Alytaus apskritis481.87.4-9.9-2.3-14.1372765.1Kauno apskritis863.412.3-5.35.80.0436772.1Klaipėdos apskritis761.510.5-4.59.34.0406260.3Marijampolės apskritis502.56.6-8.2-5.7-13.1445650.7Panevėžio apskritis592.56.5-9.4-4.4-15.24360.9Šiaulių apskritis622.97.9-7.92.1-4.1435464.7Tauragės apskritis513.85.7-8.1-6.5-14.1525153.6Telšių apskritis602.811.6-5.8-5.4-13.5496055.6Utenos apskritis481.26.9-12.9-1.8-17.3446862.6  
 
 
     
 
market  policies  has  dropped  especially  steeply  in 
certain counties(278). 

Map A18.2: Population growth, 2015-2024, 
NUTS 3, annual average change per 1000 residents 

challenges 

investment 

is  concentrated 

The  country’s  less  developed  rural  areas 
struggle  to  attract  private  investment.  Most 
foreign  direct 
in 
Vilnius.  Security-sensitive  border  areas,  such  as 
Šalčininkai,  Švenčionys  and  Pagėgiai, 
face 
in  attracting  private 
persistent 
investment,  with  investors  cautious  in  the  current 
geopolitical  situation.  Local  businesses  in      rural 
areas  face  barriers  to  finance,  including  cautious 
lending  by  local  banks.  Although  SME  support 
schemes  exist,  their  uptake  is  lower  outside  the 
major  cities (275).  However,  government  efforts 
industrial  parks  and  free 
promoting  regional 
economic  zones  have  led  to  some  success(276). 
Nevertheless,  remote  areas  still  attract 
little 
private capital, showing that a smart specialisation 
strategy  is  not  sufficiently  tailored  to  the  specific 
needs of these territories.  

Poor business services in small municipalities 
are  a  bottleneck  for  economic  development 
and  employment  opportunities.  Major  urban 
centres,  such  as  Vilnius  and  Kaunas, benefit  from 
investment  promotion  agencies,  innovation  hubs 
and incubators supported by substantial municipal 
budgets.  National 
initiatives  –  such  as  the 
centralised  business  licensing  e-system  and  the 
SME  helpdesk  –  have  helped  reduce  some 
disparities.  However,  businesses 
smaller 
municipalities  continue  to  face  higher  operational 
costs due to slower administrative response times 
and the absence of local advisory services.  

in 

Unemployment 
in  many  non-
is  higher 
metropolitan  regions  of  Lithuania.  Most  new 
jobs  and  investments  are  concentrated  in  Vilnius 
and  other  major  cities.  Unemployment  is  several 
times higher in the rural areas, than in the capital: 
for  instance,  Utena  county’s  unemployment  rate 
stood at 14.4% in 2025, compared with just 5.1% 
in Vilnius county (277), which also contributes to the 
higher poverty rates in rural areas (see Annex 12). 
Although  the  coverage  of  active  labour  market 
policies  has  shrunk  in  the  whole  country,  the 
number  of  new  participants  in  active  labour 

(275) OECD (2022). Raising Local Public Investment in Lithuania. 

(276) Statistics Lithuania (State Data Agency) (n.d.). Official 

Statistics Portal – Statistical Indicator Analysis. 

(277) Statistics Lithuania (State Data Agency) (n.d.). Official 

Statistics Portal – Statistical Indicator Analysis 

Source: Eurostat 

Areas  outside  Vilnius  and  Kaunas  are 
confronted  with  severe  depopulation  and 
ageing.  Only  Vilnius  and  Klaipėda  counties 
recorded  population  growth  between  2015-2024 
(9.2  and  4.9  per  1000),  thanks  to  positive  net 
migration  (11.3  and  9.3  per  1  000)  that  offset 
natural  population  decline.  Kaunas 
county 
remained  broadly  stable,  with  natural  population 
losses  (5.3  per  1  000)  almost  balanced  by  net 
migration  gains  (5.8  per  1 000).  The  remaining 
seven  regions  have  experienced  population  losses 
ranging  from  5.9  to  14.6  per  1000  inhabitants  a 
year.  This  has  been  due  to  a  combination  of 
outmigration,  caused  by  limited  access  to  public 
services  and  employment  opportunities,  and  a 
steep  natural  decrease  (Map  A18.2).  In  addition, 
the  share  of  older  residents  exceeds  23%  in 
counties like Utena, Panevėžys and Alytus. The old-
age  dependency  ratio  (population  aged  65  and 
over  relative  to  working-age  population)  ranges 
from  41.1%  in  Utena  county  to  just  28.4%  in 
Vilnius (279).  These  gaps 
years  of 

reflect 

(278) https://osp.stat.gov.lt/lt/statistiniu-rodikliu-

analize?hash=6d9fb4ca-9587-4586-a159-a62242670342  

(279)  OECD  (2022)  Regions  and  Cities  at  a  Glance  2022  – 

Lithuania. 

119 

 
 
 
 
 
 
outmigration of younger adults and low birth rates 
in non-metropolitan regions. 

There is a very significant urban-rural divide 
in educational attainment, skills and training 
and  adult  learning  opportunities.  Lithuania’s 
general education system is characterised by stark 
urban-rural  inequalities  in  educational  outcomes, 
reflecting 
socio-economic  differences  across 
regions.  The  gap  in  basic  skills  achievement  and 
post-secondary  education  attainment  between 
rural  and urban areas is among the widest  in the 
OECD;  however,  the  post-secondary  education 
attainment levels do not deviate much from those 
of  the  other  Baltic  countries  in  the  EU.  The  share 
of  early  leavers  from  education  and  training  (18-
24)  and  young  people  neither  in  employment  nor 
in  education  and  training  (15-29)  is  particularly 
high  in  rural  areas  (see  Annexes  11  and  13).  The 
Millennium  Schools  reform,  complemented  by 
practical  urban-rural  school  partnerships 
(e.g. 
mentoring  and  teacher  exchanges),  is  a  good 
example  how  these  issues  could  be  tackled.  The 
urban-rural  divide  is  also  reflected  in  access  to 
vocational training and adult learning. Larger cities 
host the bulk of vocational institutions and lifelong 
learning  centres,  whereas  adults  in  rural  areas 
have  far  fewer  local  upskilling  opportunities.  The 
example  of  the  Akmenė  free  economic  zone’s 
expansion  of 
training  and 
apprenticeships  is  a  model  that  other  regions 
could  adopt.  The  digital  skills  gap 
is  also 
pronounced  with  the  rural  population  lagging 
significantly  behind  urban  residents  in  advanced 
digital competences (280). 

technical 

local 

Access  to  healthcare  services  is  limited  in 
most  rural  areas.  Municipalities  in  urban  areas 
benefit  from  a  concentration  of  facilities  and 
specialists.  By  contrast,  rural  and  economically 
(e.g.  Kelmė,  Skuodas, 
weaker  municipalities 
Šalčininkai) 
general 
of 
practitioners,  long  distances  to  secondary  care, 
ageing  healthcare  infrastructure,  poor  access  to 
preventative  services  and  an  uneven  quality  of 
long-term care across territories (281) (see Annexes 

shortages 

face 

(280) Ministry of Education, Science and Sport of the Republic of 

Lithuania (2023). European Commission: Changes Launched in 
Lithuania Can Help Narrow Gaps in Learning Achievements of 
Pupils from Urban and Rural Areas. 

12  and  15).  In  addition,  mobile  health  services, 
telemedicine and outpatient care options are very 
limited.  

Digital  connectivity  is  weak  outside  cities. 
Access  to  digital  connectivity  remains  uneven 
across all settlement types, which has a significant 
impact  on  the  willingness  to  live  and  work  in  the 
regions.  Fixed  network  broadband  speeds 
in 
Lithuania  reach  190 Mb/s in  cities  (EU:  206 Mb/s), 
126 Mb/s  in  towns  and  suburbs  (EU:  156 Mb/s) 
and  126 Mb/s  in  rural  areas  (EU:  145 Mb/s) (282). 
This  gap  in  digital  infrastructure  may  hinder 
productivity, investment attractiveness and access 
to online services in regions lagging behind.  

passenger 

Sparsely  populated  rural  areas  face  a  wide 
gap  in  transport  services,  compared  with 
cities. Public transport accounted for only 7.4% of 
transportation (283).  Urban 
inland 
centres  tend  to  be  well  connected  and  integrated 
into  transport  networks,  whereas  rural  areas  and   
border  zone      face  weaker  transport  links (284). 
Evidence  suggests  many  municipalities  still  lack 
sufficient public transport services and rely heavily 
on  private  vehicles:  public  transport  uptake  in 
Lithuania is among the lowest in the EU, with 86% 
of  journeys  made  by  car (285).  Lithuania  has  the 
lowest  proportion  in  the  OECD  of  people  aged  65 
and  over  living  within  walking  distance  of  a  bus 
stop (286).  There  are  positive  examples  of  joint 
solutions 
and 
infrastructure  issues  across  municipal  boundaries. 
Klaipėda  county,  using  cohesion  policy  funding,  is 
integrating its public transport system by bringing 
in  unified  e-ticketing  and  coordinated  services 
across  the  municipalities  of  Klaipėda,  Kretinga, 
Skuodas,  Šilutė  districts  and  Neringa.  This  serves 
integrated  inter-
as  a  good  example  of  an 
municipal transport system.  

connectivity 

transport 

to 

The  2025  country-specific  recommendation 
for  Lithuania  underscores  the  importance  of 

(282) JRC based on Ookla data (Rural Observatory). 

(283) Eurostat, Modal split of inland passenger transport. 

(284) OECD (2023), Promoting Active Ageing in Lithuania: Policy 
Challenges and Solutions, Ageing and Employment Policies. 

(285) European Commission (2025). 2025 Country Report – 

Lithuania (SWD(2025) 215 final). 

(281) OECD (2023) Personalised Public Services for People in 

Vulnerable Situations in Lithuania. 

(286) OECD (2023), Promoting Active Ageing in Lithuania: Policy 
Challenges and Solutions, Ageing and Employment Policies. 

120 

 
 
 
 
 
 
 
 
 
strengthening  inter-municipal  cooperation  in 
improving  the 
delivering  public  services, 
required  legal  and  institutional  framework 
and  improving  the  coordination  of  public 
transport  routes  and  modes.  However,  the 
current  models  of  inter-municipal  cooperation  in 
providing  services  are  not  closing  the  gaps  in  the 
legal  framework,  such  as  a  lack  of  financial 
incentives  and  mechanisms  for  cost-sharing (287). 
The  recent  amendments  to  the  Road  Transport 
Code,  introducing  municipalities’  right  to  provide 
public  services  for  passenger  transport  by  setting 
up  inter-municipal  routes,  create  the  necessary 
preconditions for cross-municipal transport service 
provision.  This  does  not,  however,  address  the 
deficiencies  in  inter-municipal  transport  planning 
coordination  (absence  of  harmonised  timetables, 
integrating  ticketing  system  and  joint  financing) 
and  coordination  between  local,  inter-city  and 
railway  passenger  transport,  which  is  needed  to 
ensure optimal routes, coordinated timetables and 
transport modes.  

are 

very 

limited: 

revenues 

The  fiscal  context  for  regional  development 
in  Lithuania  is  marked  by  a  high  degree  of 
centralisation,  limited  local  fiscal  autonomy 
of  municipalities  and  heavy  reliance  on 
financing  from  EU  funds.  Municipalities’  own-
source 
local 
governments  rely  on  central  transfers  for  around 
90% of their finances, while own-source revenues 
(local  taxes,  fees,  property  income)  only  make  up 
about  10% (288).  In  2021,  less  than  15%  of 
municipal  revenues  were  raised  autonomously, 
compared  with  the  EU  average  of  32% (289). 
Personal income tax, their main revenue stream, is 
collected  at  national  level  and  redistributed  using 
an  equalisation  formula.  While  this  mitigates 
extreme  disparities,  it  may  limit  fiscal  autonomy 
investments, 
local  development 
and  constrain 
especially in the more disadvantaged regions (290).  

(287)Eurostat publication on transport  

https://ec.europa.eu/eurostat/en/web/products-key-figures/w/ks-

01-25-057.  

(288)European  Committee  of  the  Regions  (n.d.).  Division  of 

Powers: Lithuania – Fiscal Powers. 

(289)OECD Fiscal Decentralisation Database. Paris: OECD. 

(290)Ibid. 

121 

 
 
ANNEX 19: TRANSPORT 

This  Transport  Annex  presents  the  state  of  play 
and  the  challenges  Lithuania  faces  with  the 
implementation  of  the  trans-European  transport 
network  (TEN-T)  and  the  European  railway  traffic 
management system (ERTMS). 

Two  European  Transport  Corridors 
run 
through  Lithuania,  the  North  Sea  –  Baltic 
Corridor  and  the  Baltic  Sea  –  Black  Sea  – 
Adriatic  Sea  Corridor.  Lithuania’s 
railway 
network  is  primarily  built  on  the  Russian  railway 
gauge 
in  Lithuania 
comprises  1 986 km  of  rail  (866 km  of  which  on 
the  core  network)  and  2 059 km  of  road  (609  of 
which on the core network), and 281 km of inland 
waterways. Lithuania has  three airports (including 
one  core  airport),  three  ports  (including  two  core 
ports) and five urban nodes (291). 

(1 520mm).  The  TEN-T 

The  line  between  Vilnius  and  Kaunas  is  well 
developed  but  further  sections  need  to  be 
modernised, such as the electrification of the 
Kaunas-Klaipeda line. 

Moreover,  operational  incidents  -  such  as 
train  derailments  -  underscore  the  urgent 
need  for  enhanced  focus  on  rail  safety  and 
infrastructure maintenance. 

Rail  Baltica  is  by  far  largest  railway  project 
in  Lithuania  and  the  Baltic  states.  Once 
completed, this railway line will connect the Baltic 
states  to  the  European  railway  network  at  the 
European standard gauge (1 435mm). It is also of 
importance to military mobility. Given the financial 
need  of  Rail  Baltica,  a  combination  of  different 
funding sources will be needed. Besides connecting 
Poland  and  Latvia,  Lithuania  is  committed  to 
connecting  its  capital  city  of  Vilnius  to  the  main 
route.  

The  ERTMS  is  essential  to  digitalising  the 
railways and to modernising and harmonising 
railway  operations  across  Europe.  The  ERTMS 
ensures the safety of rail networks by providing a 
unified signalling system that significantly reduces 
the 
It  also  provides 
interoperability  between  national  rail  systems, 
improving  cross-border  train  movements.  It  is 

risk  of  accidents. 

(291) TENtec Information System, according to Reg. 2024/1679. 

important 
towards  a 
to  advance  efforts 
comprehensive multilateral  agreement among the 
Baltic  states,  to  strengthen  coordination  and 
support smooth cross‑border railway operations. 

and 

operational 

the  ERTMS  enhances  network 
Finally, 
efficiency, 
capacity 
increasing  the  competitiveness  of  the  rail 
sector.  Only  Rail  Baltica  will  have  to  be  ERTMS-
equipped  and these costs are included in the total 
project cost estimates. 

The  Rail  Baltica  design  from  Kaunas  to  the 
Polish border and the implementation of the 
mainline  to  connect  Latvia  and  Poland  have 
not yet been completed. A multi annual funding 
framework to ensure a smooth completion of Rail 
Baltica  with  sufficient  and  predictable  financial 
resources is lacking. 

infrastructure, 

Lithuania has little experience with operating 
trains  on  the  existing  railway  network  to 
Latvia  and  Estonia.  Together  with  Estonia  and 
Latvia, Lithuania lacks a model to operate railway 
traffic on the Rail Baltica line as a seamless cross-
traffic 
border 
management,  maintenance, 
operations 
according  to  the  rules  of  the  single  European 
railway 
and 
operational rules with the minimisation of national 
rules  in  line  with  the  EU  directives  on  rail 
interoperability  and  safety  remains  critical  to 
ensuring  that  a  new  landmark  rail  infrastructure 
such  as  Rail  Baltica  does  not  inherit  legacy 
operational rules.  

area.  Harmonising 

including 
and 

technical 

the 

Moreover,  the  National  Safety  Authority 
and 
necessary 
requires 
independence  to  fully  operate.  It  still  faces 
constraints 
challenges 
to 
affecting  staff 
in 
ensuring  that  key  processes  are  carried  out 
effectively. 

resource 
retention,  and  difficulties 

powers 

related 

In 2024, Lithuania was just below the EU average 
(45),  with  42  fatalities  per  million  inhabitants.  In 
2023,  490  people  were  seriously  injured  in  road 
crashes,  which  is  59%  higher  than  the  respective 
figure in 2019. Based on the latest available data, 
Lithuania  is  well  on  track  to  meet  the  2030 
fatality  target,  with  a  33%  reduction  since  2019. 
On  the  other  hand,  the  upward  trend  in  the 
number  of  serious  injuries  in  Lithuania  makes  it 

122 

 
 
 
 
Map A19.1: TEN-T Cross-Border & National Priority Sections in Lithuania. 

necessary to take measures and explore any other 
relevant  activities,  with  a  focus  on  crashes  inside 
urban areas and vulnerable road users. 

123