From the OECD: a message to Lithuania: pandemic reveals Lithuania’s most vulnerable areas, talks about public debt

OECD Secretary General Angel Gurría said in a press conference after the meeting that the standard of living in Lithuania was rising rapidly before the coronavirus pandemic and was one of the most advanced countries in the OECD, with the immigration finally outpacing emigration last year.

“Greater flows of people have started to flow into Lithuania and Lithuania has so far coped well with the COVID-19 pandemic due to severe restrictions, a well-functioning tax system, and financial support for households and businesses.

The economy has contracted less than many other OECD members and is recovering well enough, but there is a second wave of pandemic that is ravaging the entire world. And she, of course, also in Lithuania.

It has obscured the predictions a bit and of course we expect a vaccine to be developed soon in the next 12-18 months. “We will, but we will still have to go through a lot of difficulties by then,” he said.

Speaking of fiscal policy, A. Gurría affirmed that the public debt is growing due to all the measures taken by the state to save the Lithuanian economy, but assured that when the state economy begins to recover, the government must set long-term debt targets. term and a debt reduction strategy.

“But only when the economic recovery accelerates. It would be a big mistake to start saving as soon as the crisis passes. Then many other problems would arise.

Let’s talk about other political challenges, despite the progress made since 2000. More progress can be made in some areas. Suppose the impact of fine particulate matter in Lithuania kills most of the people of all OECD countries, even though Lithuania’s climate change strategy is ambitious enough, this policy should be tightened and subsidies should be reduced for the consumption of fossil fuels.

“Sometimes we get the impression that we are working very hard to save and get a few extra euros to save nature, but at the same time we are wasting a lot of money from government granaries to subsidize fossil fuels, which are really bad for the environment. atmosphere, “he said.

He also explained that the pandemic had revealed some vulnerable areas in Lithuania.

“Wealth is not distributed evenly, poverty is high, especially for the unemployed, single parents, the elderly. Generally, the tax system helps to balance and align these elements,” he said.

Issues – relevant

After the meeting, Simon Krėpšta, Senior Advisor to the President, also stated that the ideas and recommendations presented by the Secretary General are highly relevant and timely in the opinion of the President.

“They are relevant and timely because we have a transfer of power and the new ruling coalition will shape both the government’s program and its implementation plan.

In the president’s view, it is really important that the report addresses the fundamental challenges of Lithuania’s economic and social policy, such as the quality of education. According to the president, education is the number one long-term priority.

Public investment is another hot topic that receives a lot of attention, and here you can see that the opportunity, the funds agreed, at the EU summit this summer, is a good opportunity for Lithuania to transform its economies, “he said. .

Mr Krėpšta also pointed out that the OECD had paid great attention to the problem of poverty in Lithuania and clearly pointed out in the report that the pension replacement rate was too low and much lower than the OECD average.

“Not least point, the OECD affirms that the situation of accreditation and financing of small and medium-sized enterprises in Lithuania is difficult.

“Credit applications from many companies are rejected, credit growth is negative, therefore, in the opinion of the president, the goal of establishing a strong and sustainable financial development institution by consolidating existing financial development institutions is also an important priority, “he said.

Shapoka: to curb debt growth, certain costs will need to be frozen

Acting Finance Minister Vilius Šapoka also noted that the OECD report clearly states that Lithuania is one of the best to deal with the crisis, and Lithuania’s economic recession will be one of the smallest not only in the EU, but also in Europe as a whole. He also briefly discussed what led to this.

“The answer is in ‘yesterday’, ‘today’ and ‘tomorrow’.

Before the crisis, Lithuania was prepared: we had a low debt, we accumulated reserves for the black day and we faced the crisis with the fiscal space that we began to use when necessary.

Today: The government reacted quickly, prepared a plan and approved and improved it from the first day of quarantine. And, as the head of the OECD says, it has worked very well.

Tomorrow: how we recover, everything in our hands. All the preconditions for this are there. It is especially gratifying that the director of the OECD positively evaluates the DNA plan for the future economy and its objectives, ”said V. Šapoka and spoke about the rapid growth of public debt.

“We must bear in mind that we must not only invest effectively, but also manage debt growth. To control it, we have to freeze spending growth in those areas where they can wait a while,” he said.

When asked exactly what the costs are, he explained that next year’s draft budget is based on several important poles.

“First, focus on the most vulnerable groups in society and on meeting commitments. The second is investment in transforming the economy of the future, and the third is to stop spending growth in other areas so that we can manage and stabilize debt, ”he said.