## The Evolving Growth Model of Lithuania: Republic of Lithuania

_Selected Issues Papers, October 13, 2025_

## Source details

**Canonical URL:** [The Evolving Growth Model of Lithuania: Republic of Lithuania](https://www.imf.org/en/publications/selected-issues-papers/issues/2025/10/10/the-evolving-growth-model-of-lithuania-republic-of-lithuania-571150)

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## Bibliographic details
- Authors: Saioa Armendariz, Alberto Musso
- Published: October 13, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229027168.018

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### Overview
- Lithuania experienced strong income convergence since regaining independence, but recent progress has stalled.
- The contribution of capital deepening and total factor productivity (TFP) growth to labor productivity growth has become lackluster.
- Persisting firm-level constraints—lack of access to credit, low spending in R&D, and limited availability of workers with sufficient digital skills—help explain low rates of corporate investment, productivity, and innovation.
- Targeted structural reforms are identified as essential to support a lasting recovery in labor productivity growth.

### Key findings
- Income convergence was strong historically but has recently stagnated.
- Capital deepening contribution to labor productivity growth is weak.
- TFP growth contribution to labor productivity growth is weak.
- Firm constraints impeding productivity and innovation:
  - Lack of access to credit.
  - Low spending in R&D.
  - Limited availability of workers with sufficient digital skills.

### Policy recommendations and reform priorities
- Labor market and education reforms to reduce skill mismatches and improve labor quality.
- Financial sector reforms to allow for deeper capital markets and improved access to credit for firms.
- Reforms to accelerate the transition to a digitalized economy and to support more comprehensive AI preparedness.

### Subject emphases and keywords
- Subject areas: Labor, Labor markets, Labor productivity, Macrostructural analysis, Production, Productivity, Structural reforms, Total factor productivity.
- Keywords present in the source: AI, Baltics, Europe, Growth, IMF country, IMF staff, issues paper, Labor markets, Labor productivity, Lithuania, Productivity, skill mismatch, structural reform, Structural Reforms, Total factor productivity.

*The Evolving Growth Model of Lithuania: Republic of Lithuania — IMF Selected Issues Paper (landing page).*

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/10/10/the-evolving-growth-model-of-lithuania-republic-of-lithuania-571150_