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Economic growth is projected to strengthen as investment related to EU funds and external demand gather steam. Employment growth is limited due to a shrinking labour force and skill shortages. A temporary spike in energy prices and rising nominal wages will push up inflation.
The fiscal stance is projected to be broadly neutral over the period 2017-18. The structural measures in the budget are welcome. Further reforms are needed to reduce high inequality and poverty, as well as to deal with rapid population ageing. In particular, these include efforts to make activation programmes more effective, enhance outcomes and equity in education, and strengthen incentives to work.
Growth potential would be enhanced by deeper integration in global value chains with reforms in the business environment, including cutting red tape and upgrading infrastructure, and making R&D business support more effective. Promoting lifelong learning is essential to reap the benefits of globalisation and help workers who have been displaced find new, good jobs.
Economic Survey of Lithuania (survey page)