The head of the OECD justifies increased spending by Lithuania: you have to give up everything to fight a pandemic Business

“Lithuania weathered the first impact of COVID-19 due to good detention measures, the health care system and financial support quickly reached homes and businesses,” Gurría said at a remote press conference.

He stressed that the Lithuanian economy is forecast to have the slightest contraction among the 37 OECD countries this year, yet the second wave of coronavirus is clouding expectations.

The OECD forecasts that Lithuania’s Gross Domestic Product (GDP) will contract 2 percent this year and grow 2.7 percent in 2021.

According to the OECD Secretary General, despite hopes of receiving a vaccine against the virus next year, uncertainty could continue for the next 12 to 18 months, leaving no room for respite.

Before a pandemic, you need to contribute everything you can, all the resources you need.

“There are still many challenges ahead,” Gurría said.

An OECD official also welcomed the DNA plan for economic stimulus approved by the Lithuanian government, that Gross Domestic Product (GDP) will be invested in education, innovation, digital transformation and fighting climate change.

According to him, the injection of that money into the economy will undoubtedly increase public debt and the government must set a long-term goal to reduce this debt, but this will not happen before the pandemic ends.

“It would be a big mistake … if we started saving too early, right after the crisis, and we didn’t do well enough,” Gurría said.

He claimed that he justified Lithuania’s intentions not to take steps to reduce public debt next year, even if the country’s economy is one of the best in the world in terms of how it has managed to withstand the pandemic so far.

“Before a pandemic, you have to contribute everything you can, all the resources you need,” said the official.

Finance Minister Vilius Šapoka said that despite the second quarantine in Lithuania, the economic development forecasts do not change substantially.

According to him, the Ministry of Finance forecasts an economic recession of 1.5% this year and around 3% next. increase.

CO2 taxes

OECD chief A. Gurria also called on Lithuania to reduce fossil fuel subsidies and significantly expand the carbon tax.

“To reduce human pollution, (…) emissions must be heavily taxed,” said the organization’s secretary general.

Lithuanian politicians who participated in a remote meeting with A. Gurria agreed with this.

According to Simon Krėpšta, advisor to President Gitanas Nausėda, green taxes are becoming relevant worldwide and “in the long term will also be relevant in Lithuania”.

The finance minister said he supports the introduction of a CO2 tax.

“This is a much healthier tax for the economy than, for example, a stronger tax on employment-related income,” Šapoka said.

“I have no doubt that there will be more taxes on the green exchange rate in the future,” he added.

Aušrinė Armonaitė, a candidate for the head of the Ministry of Economy and Innovation in the new government, said the new center-right coalition had not discussed the introduction of green taxes in detail.

However, he said those taxes should “talk about pollution.”

“Taxing is not an end in itself. The tax must accelerate changes and in this case it must occur from the point of view of climate change,” said A. Armonaitė.

Call for the merger of small schools

The press conference was organized by the OECD after preparing an economic review for Lithuania. This is done once every two years.

This review urged Lithuania to connect small schools and promote university specialization for better quality education. This was announced by the BNS news agency.

The Paris-based intergovernmental economic organization claims that Lithuania’s primary and basic education outcomes are weak and that infrastructure costs are too high, reflecting the excessive costs of running small schools.

“There is a lack of systematic supervision of school activities. Recent reforms have been quite modest, mainly related to increases in teacher salaries. The government should unite small schools and strengthen quality supervision,” said a published report Monday.

The OECD emphasizes that learning outcomes in rural Lithuania are significantly worse than in cities, but municipalities oppose school reorganization.

According to the organization’s experts, the central government could review the financing criteria and the monitoring mechanism to generate changes.

“The government must continue to reform the school network, in principle applying adequate financing formulas and improving school monitoring, taking into account the benefits and drawbacks of school reorganization, such as the lengthening of the school path or the deterioration of community life. Overall, the share of spending on training, especially digital skills, should increase and spending on infrastructure should decrease, ”says the OECD.

It claims that vocational training in Lithuania does not provide adequate skills, the school network often lacks scale and specialization, and in-company training (apprenticeship), introduced in 2016, still attracts few students.

According to the OECD, higher education in Lithuania is fragmented.

“Recent efforts to consolidate the university network have failed or failed. Funding provides few initiatives to improve quality. The government should encourage universities to specialize in more limited areas. A more comprehensive quality assessment and reform of the Funding could also help improve quality, ”says the OECD.