2019 Index of Economic Freedom

Lithuania

overall score74.2
world rank21
Rule of Law

Property Rights73.6

Government Integrity47.8

Judicial Effectiveness61.2

Government Size

Government Spending65.1

Tax Burden86.4

Fiscal Health97.3

Regulatory Efficiency

Business Freedom75.2

Labor Freedom63.6

Monetary Freedom84.6

Open Markets

Trade Freedom86.0

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 2.8 million
  • GDP (PPP):
    • $91.2 billion
    • 3.8% growth
    • 3.0% 5-year compound annual growth
    • $32,299 per capita
  • Unemployment:
    • 7.1%
  • Inflation (CPI):
    • 3.7%
  • FDI Inflow:
    • $595.4 million

Lithuania’s economic freedom score is 74.2, making its economy the 21st freest in the 2019 Index. Its overall score has decreased by 1.1 points, with declines in judicial effectiveness, monetary freedom, and government integrity exceeding modest improvements in business freedom and government spending. Lithuania is ranked 12th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

Lithuania’s economic growth has gained momentum, driven by higher domestic and external demand, but more reforms are needed to improve the business environment and competitiveness. In addition, a steady outflow of young and highly educated people has caused some shortages of skilled labor. However, an improving labor market has spurred private consumption, and investment inflows from the EU have risen. Adoption of the euro has reduced the systemic risks related to euro-denominated debt. The country’s relatively sound legal framework generally sustains the rule of law.

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Background

Lithuania regained independence in 1991, joined the European Union in 2004, and acceded to the Organisation for Economic Co-operation and Development in 2018. President Dalia Grybauskaite was reelected to a final five-year term in 2014. Prime Minister Saulius Skvernelis of the centrist Lithuanian Peasants and Green Union, in office since 2016, heads a minority coalition government with the Lithuanian Social Democratic Labor Party. Privatization of most state-owned enterprises has helped the economy to rebound and become one of the fastest growing in the EU, although many younger workers have emigrated for jobs elsewhere in Europe. Lithuania’s reliance on Russian natural gas has declined notably since the opening of an offshore liquefied natural gas terminal at Klaipeda.

Rule of LawView Methodology

Property Rights 73.6 Create a Graph using this measurement

Government Integrity 47.8 Create a Graph using this measurement

Judicial Effectiveness 61.2 Create a Graph using this measurement

Private property is respected, and protection of intellectual property rights has been upgraded in recent years. EU membership strengthened judicial independence. Anticorruption measures, steadily improved since 2014, were further bolstered when a law was passed in June 2018 making public officials criminally liable in corruption-related crimes. The judiciary reacted swiftly and firmly when a major banking scandal erupted in 2018.

Government SizeView Methodology

Lithuania’s top individual and corporate income tax rates are 15 percent. Other taxes include inheritance and value-added taxes. The overall tax burden equals 30.2 percent of total domestic income. Over the past three years, government spending has amounted to 34.1 percent of the country’s output (GDP), and budget surpluses have averaged 0.2 percent of GDP. Public debt is equivalent to 36.5 percent of GDP.

Regulatory EfficiencyView Methodology

The overall entrepreneurial framework has become fairly streamlined and efficient. Business formation and operation take place without bureaucratic interference. New labor regulations intended to enhance labor market flexibility have come into force. Lithuania scrapped its fuel subsidies after connecting to Poland and Sweden’s electric grid to import electricity at a lower cost, saving consumers tens of millions of euros.

Open MarketsView Methodology

The combined value of exports and imports is equal to 160.6 percent of GDP. The average applied tariff rate is 2.0 percent. Lithuania implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. The relatively sound regulatory framework facilitates foreign investment flows. The competitive financial sector offers a full range of services, and the banking system is stable.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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