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Lithuania strategy

Despite successful market-oriented and democratic reforms, Lithuania was hit hard by the global financial crisis of 2009-2010. The crisis revealed a number of remaining reform challenges, particularly in the areas of competitiveness and public and corporate governance.

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Challenges

This recovery from the recession of 2008-09 has now entered its third year, and growth has been well balanced between external demand and domestic private consumption, although growth weakened toward the end of 2011 following the disruptions in the Eurozone. Nevertheless, there have been gains in competitiveness over recent years, underlined by the largest reduction in real unit labour costs relative to 2007 of all new EU member states. Fixed capital investment has also recovered well. Unemployment has fallen and, together with encouraging wage trends, explains the relatively resilient consumption growth throughout the last year.

Having remained outside an IMF programme, the government adopted a moderate fiscal consolidation package in 2009. The deficit remained precariously high in both 2010 and 2011 and the country witnessed a rapid deterioration in its public debt indicators, with public debt now projected to continue climbing to a peak this year at just over 40 per cent of GDP. The authorities seek to comply with Maastricht criteria from this year and an ambitious target for the budget deficit of three per cent this year has been maintained, despite somewhat lower growth expectations.


Last updated 21 November 2012

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