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- GDP (PPP):
- $86.1 billion
- 1.6% growth
- 3.0% 5-year compound annual growth
- $29,972 per capita
- Inflation (CPI):
- FDI Inflow:
Lithuania’s economic freedom score is 75.3, making its economy the 19th freest in the 2018 Index. Its overall score has decreased by 0.5 point, with declines in the scores for government integrity and business freedom more than balancing improvements in investment freedom, judicial effectiveness, and fiscal health. Lithuania is ranked 11th among 44 countries in the Europe region, and its overall score is above the regional and world averages.
Lithuania’s ongoing recovery hinges on improving the business environment and competitiveness. In addition, a steady outflow of young and highly educated people is causing a shortage of skilled labor. The new labor code that came into force in 2017 includes new types of contracts, an increase in the legally permitted number of working hours, and reduced statutory notice periods and severance payments in cases of dismissal. Lithuania’s relatively sound legal framework sustains judicial effectiveness and government integrity.
Lithuania regained its independence from the Soviet Union in 1991, joined the European Union in 2004, and is working on accession to the Organisation for Economic Co-operation and Development. President Dalia Grybauskaite was reelected to a second and final five-year term in 2014. The centrist Lithuanian Peasants and Green Union surged to win the most seats in October 2016 parliamentary elections. Former Interior Minister and police chief Saulius Skvernelis became prime minister, heading a coalition government of the LPGU and center-left Social Democrats. Lithuania has depended heavily on Russia for natural gas, but the offshore liquefied natural gas terminal at Klaipeda helps to diversify energy supplies. Large numbers of Lithuanians are leaving to work in other EU nations.
Lithuania’s constitution protects property rights, and protection of intellectual property rights has improved in recent years. The government generally respects the independence of the judiciary, although improvements are still needed. Paying or accepting a bribe is a criminal act, but anticorruption laws are not always implemented effectively. Officials at times engage in corrupt practices with impunity.
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 30.1 percent of total domestic income. Over the past three years, government spending has amounted to 34.7 percent of total output (GDP), and budget deficits have averaged 0.3 percent of GDP. Public debt is equivalent to 40.0 percent of GDP.
Business-friendly regulatory reform is lagging in Lithuania, but a new labor code went into effect in 2017, and many Lithuanians expect it to encourage foreign investment and job creation. The government seeks to reform its state-owned enterprises and has caused electricity rates to drop by more than 8 percent by ending subsidies and importing power from Poland and Sweden.
Trade is extremely important to Lithuania’s economy; the combined value of exports and imports equals 148 percent of GDP. The average applied tariff rate is 1.6 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. Most commercial banks are foreign-owned. The financial sector, competitive and stable, offers a wide range of services. Capital markets are small but function well.