March, 2020 – April, 2021 BGI Consulting, together with partners AARC (Ireland), in collaboration with the European Commission and the Ministry of Economy and Innovations of the Republic of Lithuania, carried out the project Building analytical capacity of the national productivity board. The project was commissioned by the Directorate-General for Structural Reform Support (DG REFORM).

 

In recent years, Lithuania has achieved strong economic performance, with real GDP annual growth reaching 3.4% in 2019, placing it amongst 10 fastest growing economies in the EU. However, the shrinking working-age population and lack of productive investments in innovations, research and technological development led to a surge in wages, which outpaced the growth of labour productivity. Due to these circumstances, Lithuania faces the possibility of falling into the middle-income trap – a position that could compromise its impressive gains in competitiveness. Hence, achieving a sustained increase in productivity and business investments should be regarded as the main objectives for Lithuanian prosperity. To support authorities in attaining these priorities and offer valuable insights, the Economic Development Department of the Ministry of Economy and Innovation of Lithuania established the National Productivity Board (hereinafter – LNPB). The mission of the LNPB is to monitor the state of the Lithuanian economy through sound indicators, anticipate the expected impact of reforms on selected macroeconomic aggregates and deliver thorough policy recommendations.

 

The report provides relevant tools and competencies to encompass support to LNPB in enhancing their ability to formulate, develop and implement reform strategies and provision of practical knowledge of macro-econometric modelling, macro-econometrics and statistics as well as methodologies to translate actual reform measures into QUEST III R&D model shocks. The report presents an illustrative assessment of the state of the Lithuanian economy strongly focused on productivity and competitiveness, as well as the results of an ex-ante assessment of the three Lithuanian structural reforms, agreed with the Ministry of Economy and Innovations.

 

One of the reforms employed by the Lithuanian Government to improve the state of the economy and analysed in this report is Innovation Reform, consisting of Implementing a Single Agency model and establishing the Innovation Promotion Fund. Another reform employed by the Lithuanian Government and analysed in this report is Export Reform. The support measures foreseen to be implemented under this reform have elements of both traditional aid to the private sector (for example, a significant part of investments will most likely be provided in the form of non-repayable subsidies for the acquisition of new equipment) and an aid promoting innovation in the private sector (namely, the reform foresees support for new product development). The third reform analysed that was employed by the Lithuanian Government in order to advance the potential of digital tools is Digitalisation Reform, consisting of two pillars: the activation of digital services and the improvement of human resources and industry.

 

The benchmarking analysis at the branch level signals some untapped potential that could be exploited with an aim to achieve higher growth of economy and productivity of Lithuania. More efforts should be made to promote high value-added branches of Information and communication and Professional, scientific and technical activities; administrative and support service activities. In addition, branch Financial and insurance activities is small in Lithuania, compared to the control group countries. This may indicate insufficient financing available for businesses which can be seen as a limitation for the growth of the Lithuanian economy. The export-oriented branch of Manufacturing is also an important driver in all of the countries analysed, thus it should be wise to keep it among the priorities.

 

Various evaluation methods were used during the project: document analysis, analysis of secondary sources, analysis of statistical data, analysis of publicly available information, semi-structured interviews, macro-modelling, meta-analysis, expert evaluation. In order to support the national authorities and QUEST model users in enhancing their capacity to implement models in reform policies and strategies, the training for the LNPB on macroeconomic modelling, macro-econometrics and statistics were conducted.

 

The evaluation report currently is not public.