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The European Commission Publishes the Assessment of the Updated 2021 Lithuanian Draft Budgetary Plan

Date

2021 01 21

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Today the European Commission (EC) published the assessment of the 2021 Lithuanian Draft Budgetary Plan updated by the XVIII Government stating that Lithuania takes proper fiscal measures in response to an adverse COVID-19 pandemic impact on the national economy, people and health system, and the fiscal policy pursued is in line with the Recommendations to Lithuania published by the Council in July 2020. 

“Taking into consideration the pandemic development, the European Commission assents the need for Lithuania to proceed the fiscal policy supporting the economy, however it emphasizes the need to weigh up very carefully the appropriateness of applicable measures, their scope and duration. The updated State budgetary plan for this year concentrates on containment of the COVID-19 pandemic, on what we expect to achieve in the coming six months. At the Spring Session of the Seimas it is planned to revise the budgetary plan by incorporating the funds from the European Union (EU) Recovery an Resilience Facility and reviewing the resources designated to combat the Coronavirus”, says Minister of Finance Gintarė Skaistė.          

The EC calls to pay particular attention to planning the investments that may foster a sustainable recovery of the economy and its transformation towards green economy and digitalisation. Also, the stress is made on the importance of responsible public finance management in ensuring that sustainability of the general government finance is maintained in the long term.   

The EC, in the assessment of the 2021 draft budgetary plans of Lithuania and other euro area countries, has not applied the fiscal discipline rules set out in the EU Stability and Growth Pact (SGP). For the countries facing a severe economic downturn due to the COVID-19 pandemic, in 2021 the EC applied the SGP General Flexibility Clause.

Without assessing the compliance to the fiscal discipline rules set out in the SGP, the EC analyses the impact of the COVID-19-related measures and other decisions made by the Government on general government finance. The EC assessment draws attention to the fact that assumed long-term budgetary commitments should be counterbalanced by sustainable sources of revenue, the stress is made on the importance of cost effectiveness, investments that may reinforce economic potential and structural reforms.

In 2021 the EC forecasts for Lithuania the general government deficit to be of 7.2 % of the gross domestic product (GDP). The general government deficit projected by the Ministry of Finance (MoF) for 2021 will account for 7 % of GDP. The general government debt projections of the MoF and EC for 2021 do not substantially differ. According to the EC, in 2021 the debt will represent 51.3 % of GDP, and based on the MoF assessment – 51.9 % of GDP. According to the EC assessment, Lithuania’s economy will grow 2.9 % in 2021.

The updated 2021 Lithuanian Draft Budgetary Plan is available here.

The EC assessment of Lithuania is available here, and of all countries – here.

Additional information:

The EC has assessed the 2021 Lithuanian Draft Budgetary Plan updated based on specified drafts submitted to the Seimas by XVIII Government of the Republic of Lithuania: draft Law on the Approval of Financial Indicators of the State Budget  and Municipal Budgets for 2021, draft Law on the Approval of Indicators of the SSIF Budget for 2021, draft Law on the Approval of Indicators of the CHIF Budget for 2021. Also, considering the projections of revenue and expenditure of other subsectors attributable to general government (drafted based on information and data obtained by 15 December).

The EU Council Recommendations to Lithuania are available here.

The EC official letter concerning the application of the SGP General Escape Clause – here.