{
  "title": "IMF Executive Board Concludes Article IV Consultation with the Republic of Lithuania",
  "publication": "IMF News, July 31, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/07/30/pr19308-republic-of-lithuania-imf-executive-board-concludes-article-iv-consultation",
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  "summary": "Output and demand - Real GDP growth (annual percentage change): 2018: 3.5; 2019: 3.2; 2020: 2.6; 2021: 2.5; 2022: 2.4; 2023: 2.3; 2024: (not listed in table but projections continue) - Domestic demand growth (year-on-year, in percent): 2019: 3.8 - Private consumption growth (year-on-year, in percent",
  "publishDate": "2019-07-31",
  "sections": [
    {
      "heading": "Economic performance and near-term outlook",
      "content": "- 2018: Real GDP expanded by 3.5 percent; current account reached its highest surplus in four years.\n- Private consumption growth accelerated in 2018 with better-than-expected employment growth and a rebound in real wage growth.\n- Labor market: tight, with labor costs among the fastest growing in the EU, but without inflationary pressures.\n- Fiscal outcome: government achieved a higher fiscal surplus for the third year in a row.\n- 2019 projection: Real GDP growth projected at 3.2 percent.\n- Medium-term projection: Growth expected to moderate to a more sustainable pace as the economy expands above potential."
    },
    {
      "heading": "Key risks and vulnerabilities",
      "content": "- External risks:\n  - Vulnerability to slower growth in Europe, continued trade tensions, uncertainty around Brexit conditions, and geopolitical risks.\n- Domestic risks:\n  - Emigration, population aging, and slow progress in implementing key aspects of the government’s reform agenda.\n- Fiscal risks:\n  - Heightened risks to revenues and increased spending pressures from social needs.\n  - Revenue buoyancy may largely reflect cyclical factors; gains from combating informality are difficult to predict and revenue impact of recent reforms is uncertain.\n  - Without commensurate increases in revenues, spending pressures increase budget rigidities.\n- Social risks:\n  - Large social disparities and low/declining pensions increase pressures to boost basic pensions; basic pensions have been transferred to the budget this year, representing a fiscal risk over the medium-term."
    },
    {
      "heading": "Executive Board assessment and policy guidance",
      "content": "- Overall assessment:\n  - The Lithuanian economy has continued to enjoy a strong macroeconomic and fiscal performance, but long-term challenges remain largely unaddressed.\n  - Prudent fiscal policy, a flexible labor market, and proactive macroprudential policies have been critical to preserve stability and should be maintained.\n  - Structural reforms are necessary to address demographic pressures, social disparities, and to ensure sustained high wage growth and improved living standards.\n- Fiscal policy:\n  - The continued strong performance suggests that a neutral fiscal stance would have been preferable this year.\n  - Planned increases in social spending will likely require higher revenues given discretionary spending is already low.\n  - Targeted social spending should be the main tool to ensure efficient use of limited resources.\n  - Design and generosity of child benefits should balance reducing child poverty against potential disincentives to work, particularly for women.\n- Labor market and active labor market policies (ALMPs):\n  - ALMP should be strengthened to address skill mismatches and increase labor force participation.\n  - Current funding is low and relies excessively on EU funds; composition inadequately reflects cyclical conditions or labor market needs.\n  - Reliance on employment subsidies should decrease and focus on the most disadvantaged groups only.\n  - Emphasis should shift to well-designed training curricula to upskill the labor force.\n- Education and healthcare:\n  - Despite growing urgency, education and healthcare reforms have failed to deliver.\n  - Maintaining large and inefficient networks comes at the cost of quality and opportunities; planned wage increases in these sectors should be made conditional on progress in network optimization.\n- Pensions and taxes:\n  - Pension and tax reforms go in the right direction, but remaining challenges will require future compromises.\n  - Tax reform could have been more ambitious in shifting taxes away from labor; reduction of tax exemptions and privileged regimes is needed.\n  - Pension reform has ensured financial, but not social, sustainability.\n- Macroprudential and financial stability:\n  - Macroprudential policy is being used proactively to prevent systemic risks.\n  - The Bank of Lithuania raised the countercyclical buffer to one percent in mid-2018 in response to moderate cyclical systemic risks.\n  - Financial system remains sound, liquid, and profitable.\n- Fintech and AML/CFT:\n  - Fintech offers opportunities to improve financial services and produce high-skill jobs, initially in payment services and cross-border transactions.\n  - Shift toward cross-border transactions brings new supervisory challenges, particularly related to AML/CFT.\n  - Authorities’ efforts to implement the 2018 MONEYVAL recommendations and enhance inter-agency coordination should be complemented by adequate resources across all agencies involved."
    },
    {
      "heading": "Selected economic indicators and projections (exact values from source)",
      "content": "- Quota (current, % of total): SDR 441.6 million, 0.09 percent\n- Per capita GDP (2018): € 16,100\n- Literacy rate (2015): 99.8 %\n- At-risk-of-poverty (after transfers), share of population (2017): 29.6%\n- Key export markets: Russia, Latvia, Estonia, Poland, Germany\n\nOutput and demand\n- Real GDP growth (annual percentage change): 2018: 3.5; 2019: 3.2; 2020: 2.6; 2021: 2.5; 2022: 2.4; 2023: 2.3; 2024: (not listed in table but projections continue)\n- Domestic demand growth (year-on-year, in percent): 2019: 3.8\n- Private consumption growth (year-on-year, in percent): 2019: 3.7; 2020: 3.0\n- Domestic fixed investment growth (year-on-year, in percent): 2019: 6.0; 2020: 5.5; 2021: 4.3; 2022: 3.6\n- Inventories (contribution to growth): 2018: -1.1; 2019: -0.1; 2020: 0.0\n- Net external demand (contribution to growth): 2018: 0.6; 2019: -0.5; 2020: -0.9; 2021: -0.8\n- Nominal GDP (in billions of euro): 2018: 45.1; 2019: 47.7; 2020: 50.2; 2021: 52.6; 2022: 55.1; 2023: 57.6; 2024: 60.2\n- Output gap (percent of potential GDP): 2018: 0.5; 2019: 0.7; 2020: 0.4; 2021: 0.2; 2022: 0.1\n\nLabor and prices\n- Employment (annual percentage change): 2018: 1.5\n- Unemployment rate (year average, in percent of labor force): 2018: 6.1; 2019: 5.9; 2020: 5.8; 2021: 5.7; 2022: 5.6\n- Average monthly gross earnings (annual percentage change): 2018: 9.9; 2019: 8.0; 2020: 5.4; 2021: 4.9; 2022: 4.7; 2023: 4.6\n- Average monthly gross earnings, real (CPI-deflated, annual percentage change): 2018: 7.2; 2019: 2.7\n- Labor productivity (annual percentage change): 2018: 2.0\n- HICP, end of period (year-on-year percentage change): 2018: 1.8; 2019: 2.2\n- HICP core, period average (annual percentage change): 2018: 1.9; 2019: 2.1\n\nGeneral government finances\n- Revenue (percent of GDP): 2018: 34.7; 2019: 35.7; 2020: 35.8\n- Of which EU grants: 2018: 0.8; 2019: 1.3; 2020: 1.2; 2021: 1.1; 2022: 1.0\n- Expenditure (percent of GDP): 2018: 34.0; 2019: 35.4; 2020: 35.5; 2021: 35.6\n- Of which: Non-interest: 2018: 33.1; 2019: 34.5; 2020: 34.8; 2021: 35.2; 2022: 35.3\n- Fiscal balance (percent of GDP): 2018: 0.3\n- General government gross debt (percent of GDP): 2018: 34.2; 2019: 32.0; 2020: 30.2; 2021: 28.7; 2022: 27.3; 2023: 26.0; 2024: 24.7\n- Of which: Foreign currency-denominated: 2018: 9.6; 2019: 9.0; 2020: 8.5; 2021: 8.1; 2022: 7.7; 2023: 7.3; 2024: 7.0\n\nBalance of payments and external\n- Current account balance (percent of GDP): 2018: 1.6; 2019: -0.4\n- Current account balance (billions of euros): 2018: -0.2\n- Exports of goods and services (volume change, in percent): 2018: 5.1; 2019: 4.0\n- Imports of goods and services (volume change, in percent): 2018: 4.5\n- Short-term debt at original maturity (percent of GDP): 36.7; 32.2; 30.8; 29.8; 29.0 (series presented)\n- Gross external debt (percent of GDP): 2018: 78.5; 2019: 73.2; 2020: 69.6; 2021: 66.8; 2022: 63.7; 2023: 61.0; 2024: 58.5\n\nExchange rates and saving-investment\n- Exchange rate (euro per U.S. dollar, end of period): 0.88\n- Exchange rate (euro per U.S. dollar, period average): 0.85\n- Gross national saving (percent of GDP): 2018: 19.8; 2019: 20.0; 2020: 20.4; 2021: 20.1; 2022: 19.4; 2023: 19.1\n- Gross national investment (percent of GDP): 2018: 18.2; 2019: 18.8; 2020: 19.3; 2021: 19.5; 2022: 19.7; 2023: 19.9\n- Foreign net savings: 2018: -1.6; 2019: -1.2; 2020: -0.6\n\nSources noted in original release: Lithuanian authorities; World Bank; Eurostat; and IMF staff estimates and projections.\n\nSource: Press Release No. 19/308, IMF Executive Board concluding the Article IV consultation with the Republic of Lithuania, July 31, 2019.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Republic of Lithuania and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/07/30/pr19308-republic-of-lithuania-imf-executive-board-concludes-article-iv-consultation"
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    "Published: July 31, 2019",
    "2018: Real GDP expanded by 3.5 percent; current account reached its highest surplus in four years.",
    "Private consumption growth accelerated in 2018 with better-than-expected employment growth and a rebound in real wage growth.",
    "Labor market: tight, with labor costs among the fastest growing in the EU, but without inflationary pressures.",
    "Fiscal outcome: government achieved a higher fiscal surplus for the third year in a row.",
    "2019 projection: Real GDP growth projected at 3.2 percent.",
    "Medium-term projection: Growth expected to moderate to a more sustainable pace as the economy expands above potential.",
    "External risks:",
    "Domestic risks:",
    "Fiscal risks:",
    "Social risks:",
    "Overall assessment:",
    "Fiscal policy:",
    "Labor market and active labor market policies (ALMPs):",
    "Education and healthcare:",
    "Pensions and taxes:",
    "Macroprudential and financial stability:",
    "Fintech and AML/CFT:",
    "Quota (current, % of total): SDR 441.6 million, 0.09 percent",
    "Per capita GDP (2018): € 16,100",
    "Literacy rate (2015): 99.8 %",
    "At-risk-of-poverty (after transfers), share of population (2017): 29.6%",
    "Key export markets: Russia, Latvia, Estonia, Poland, Germany",
    "Real GDP growth (annual percentage change): 2018: 3.5; 2019: 3.2; 2020: 2.6; 2021: 2.5; 2022: 2.4; 2023: 2.3; 2024: (not listed in table but projections continue)",
    "Domestic demand growth (year-on-year, in percent): 2019: 3.8",
    "Private consumption growth (year-on-year, in percent): 2019: 3.7; 2020: 3.0",
    "Domestic fixed investment growth (year-on-year, in percent): 2019: 6.0; 2020: 5.5; 2021: 4.3; 2022: 3.6",
    "Inventories (contribution to growth): 2018: -1.1; 2019: -0.1; 2020: 0.0",
    "Net external demand (contribution to growth): 2018: 0.6; 2019: -0.5; 2020: -0.9; 2021: -0.8",
    "Nominal GDP (in billions of euro): 2018: 45.1; 2019: 47.7; 2020: 50.2; 2021: 52.6; 2022: 55.1; 2023: 57.6; 2024: 60.2",
    "Output gap (percent of potential GDP): 2018: 0.5; 2019: 0.7; 2020: 0.4; 2021: 0.2; 2022: 0.1",
    "Employment (annual percentage change): 2018: 1.5",
    "Unemployment rate (year average, in percent of labor force): 2018: 6.1; 2019: 5.9; 2020: 5.8; 2021: 5.7; 2022: 5.6",
    "Average monthly gross earnings (annual percentage change): 2018: 9.9; 2019: 8.0; 2020: 5.4; 2021: 4.9; 2022: 4.7; 2023: 4.6",
    "Average monthly gross earnings, real (CPI-deflated, annual percentage change): 2018: 7.2; 2019: 2.7",
    "Labor productivity (annual percentage change): 2018: 2.0",
    "HICP, end of period (year-on-year percentage change): 2018: 1.8; 2019: 2.2",
    "HICP core, period average (annual percentage change): 2018: 1.9; 2019: 2.1",
    "Revenue (percent of GDP): 2018: 34.7; 2019: 35.7; 2020: 35.8",
    "Of which EU grants: 2018: 0.8; 2019: 1.3; 2020: 1.2; 2021: 1.1; 2022: 1.0",
    "Expenditure (percent of GDP): 2018: 34.0; 2019: 35.4; 2020: 35.5; 2021: 35.6",
    "Of which: Non-interest: 2018: 33.1; 2019: 34.5; 2020: 34.8; 2021: 35.2; 2022: 35.3",
    "Fiscal balance (percent of GDP): 2018: 0.3",
    "General government gross debt (percent of GDP): 2018: 34.2; 2019: 32.0; 2020: 30.2; 2021: 28.7; 2022: 27.3; 2023: 26.0; 2024: 24.7",
    "Of which: Foreign currency-denominated: 2018: 9.6; 2019: 9.0; 2020: 8.5; 2021: 8.1; 2022: 7.7; 2023: 7.3; 2024: 7.0",
    "Current account balance (percent of GDP): 2018: 1.6; 2019: -0.4",
    "Current account balance (billions of euros): 2018: -0.2",
    "Exports of goods and services (volume change, in percent): 2018: 5.1; 2019: 4.0",
    "Imports of goods and services (volume change, in percent): 2018: 4.5",
    "Short-term debt at original maturity (percent of GDP): 36.7; 32.2; 30.8; 29.8; 29.0 (series presented)",
    "Gross external debt (percent of GDP): 2018: 78.5; 2019: 73.2; 2020: 69.6; 2021: 66.8; 2022: 63.7; 2023: 61.0; 2024: 58.5",
    "Exchange rate (euro per U.S. dollar, end of period): 0.88",
    "Exchange rate (euro per U.S. dollar, period average): 0.85",
    "Gross national saving (percent of GDP): 2018: 19.8; 2019: 20.0; 2020: 20.4; 2021: 20.1; 2022: 19.4; 2023: 19.1",
    "Gross national investment (percent of GDP): 2018: 18.2; 2019: 18.8; 2020: 19.3; 2021: 19.5; 2022: 19.7; 2023: 19.9",
    "Foreign net savings: 2018: -1.6; 2019: -1.2; 2020: -0.6",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Republic of Lithuania and the IMF](http://www.imf.org/external/country/LTU/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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