OECD praises Lithuania’s impressive recovery, but sees risks

Last year, the organization called on Lithuania and other members to take all measures to combat the pandemic and its economic consequences, but now one of the organization’s leaders, Ulrik Vestergaard Knudsen, warns that the growing public debt should be monitored more. close up.

“There is no risk of debt accumulation,” a Danish deputy secretary-general of Denmark told BNS.

According to him, Lithuania, which celebrated the third anniversary of OECD membership a few days ago, should pay close attention to retraining, professional development and lifelong learning of employees.

According to him, rich countries joined by the OECD should ensure not only the widest possible vaccination of their populations against the coronavirus, but also that vaccines are as widely available as possible in the rest of the world.

– The Lithuanian economy in the 2020 pandemic was considered a real success story. What do you think were the main reasons that Lithuania was so successful in 2020?

– I completely agree, I think that we can really consider the Lithuanian economy as a success story. If we look at the numbers, we are now forecasting around 4 percent both this year and next. economic growth, which is pretty impressive considering it was only 0.9 percent last year. contraction. Combining these factors, you can say that it is definitely among the best in Europe.

We note three things that have helped Lithuania survive this crisis better than most other countries. One of them is the early introduction of virus management measures. We have seen this around the world: governments that reacted early had an advantage over others, both in terms of health and economic measures.

The second is that these measurements were very comprehensive. This was not the time to be careful. The third thing is that the first quarantine in March 2020 was quite smooth, it followed a similar path to that of other Nordic and Baltic countries: Lithuania was hit quite weakly by the first wave, but then the second and third waves crossed more strongly.

– What risks do you see for Lithuania?

We are currently seeing inflation risks, which we are closely monitoring. We still think it will be transitional, but we must watch it. If we look at the labor market, rather than economic activity and growth in general, the numbers are a little less impressive, but that applies to all countries, even the United States. Employment is growing slightly slower than the economy, so specific measures will be needed here, as well as effective social protection.

The last thing we can say about it is that a smooth and efficient labor market is important because the world economy is changing rapidly. We are seeing changes in the digital transformation, we are seeing leaps that otherwise would have lasted between 5 and 7 years.

It also means that the job market and the economy are changing, which is why recycling systems are very important. The government should focus on retraining, professional development and lifelong learning. Growing at the pace of digital transformation also means that the future of work is already there.

– Do you think that Lithuania has already returned to sustainable growth after a period of uncertainty? Would you see a serious risk to the economy if there were another quarantine that would restrict the activities of companies and require another package of state aid?

– In general, I think the prospects for the Lithuanian economy are very good, you are on the right track. However, when asked about a possible fourth wave, I must say that it is a serious risk and that it is only partially controlled by the Lithuanian Government, both in terms of health and economic situation.

Globally, the race will be between vaccination and viral mutations. That is why we say, like other international organizations, that yes, every rich OECD country must ensure that its own population is vaccinated, because that will protect it from the fourth wave.

But that is not enough. We also have a duty, not just a moral one, to ensure that the rest of the world is vaccinated, otherwise the virus will mutate. This virus will not go away until most of the world has been vaccinated.

– In Lithuania, the vaccination process has noticeably slowed down in recent weeks. Do you see this as the biggest risk?

– I see slowing down vaccination as a major risk for any economy.

– Former OECD chief Ángel Gurría said last year that countries must build their entire arsenal of weapons before a pandemic and that controlling public debt and deficits should not be the government’s first priority at the same time. Do you think that we are already in a stage where the worst period of the pandemic is in the past and we should start thinking about a return not only to social normality but also to the fiscal life of the state?

– When we said this almost a year ago, I think the situation was that states were too cautious, so we needed to send a signal that this is not the time for caution. It was a time to support jobs and the economy, as the first wave and the quarantine were the harshest of their time. Therefore, there had to be fiscal measures equivalent to the severity of the quarantine.

At that time, and we still are, but especially then we were in a low or even negative interest environment. Therefore, the cost of debt was not a very significant factor, as, for example, after the 2008-2009 crisis. Now, I think we need to monitor inflation and interest rates more closely. It is not the case that accumulating debt is risk-free.

Another thing is that we must also take into account the fact that we cannot withdraw state aid to the economy prematurely, but neither must we continue to support precarious jobs. We need to make sure that we support viable parts of the economy.

– One of the OECD recommendations to Lithuania was to reduce the number of state-owned companies by converting them into public limited companies. This reform is being implemented quite quickly, decisions have been made regarding the Klaipeda Port Authority and some other companies. What is the essence of this recommendation and what are the benefits of changing the status of companies?

– One of the reasons is that it contributes to transparency and accountability. The second reason is the issue of fairness: when SOEs have a non-standard legal form, it is more difficult to ensure that they enjoy the same competitive conditions as other companies.

– When it comes to economic transformation, everyone strives to be a leader in the green economy, in digitization. Do you think that Lithuania could be one of the countries that would be the leaders of this transformation?

– I think you are already ahead in terms of digital transformation. I have had meetings both in Parliament and in the Government and I have told the ministers that I hope Lithuania can join the work that we are doing in the OECD, which is related to digital transformation, artificial intelligence and cybersecurity. Not only because it would be interesting for Lithuania itself, but also because Lithuania has something to share: in some of these areas, you are among the leaders. One of the missions of the OECD is to share good practices.

When it comes to green transformation, the situation is a bit more ambiguous. I find some of the initiatives on waste management very commendable. As in all countries, there are areas where you are setting an example for others, but there are also areas where you are falling behind.

– As you mentioned, one of the objectives of the OECD is to share good practices. One of the areas where Lithuania needs such good practice is education. How does the OECD envision optimal educational reform? What should your goals be to make education a strength rather than a limiting factor?

– One of the most important areas of cooperation during the first years of Lithuania’s membership in the OECD was the revision of the skills strategy. I believe that this is one of the areas in which our cooperation has been very fruitful.

If we look at the education system more broadly, I must say that there are challenges. Statistics for 2006-2018 show that results in reading or math did not improve much during this period. I am glad that Lithuania is actively participating in all OECD programs, but I think there is room for improvement.

We are talking with your government about the transformation of the school network. We believe that Lithuania should involve more all stakeholders in this process: schools, students, parents.

More specifically, we also pay attention to areas such as teacher recruitment and in-service training: more than half of the teachers in Lithuania are over 50 years old and only 18 percent. teachers believe that their profession is valued in society. This, perhaps, also reveals some reputational problems that make the work of teachers more valued.

– Thank you for the interview.