Fiscal outlook
Lithuania recorded a 1.3% deficit and a debt-to-GDP ratio of 38% in 2024.
Deficit measures the extent of borrowing in a given 12 months. Debt-to-GDP compares the overall public debt to the dimensions of the economic system. Each are at present used to find out how a lot borrowing a member state is allowed to undertake. Nevertheless, neither measure in itself determines a authorities’s capability to maintain increased ranges of public funding. Fiscal sustainability depends upon progress, the multiplier results of funding, rates of interest, inflation, the construction of the economic system and exterior dangers corresponding to local weather change. NEF advocates shifting away from strict numerical debt targets.
Rising local weather prices
A current examine ranks Lithuania because the European nation most affected by local weather change, with vital will increase in sea ranges, sea and floor temperatures, and precipitation. The nation is experiencing an growing variety of water shortages, with meteorologists warning that droughts might escalate to excessive or catastrophic ranges. There has additionally been an enhance in excessive climate, with 18 extreme meteorological occasions recorded final 12 months, two of which have been categorised as catastrophic. In 2024, heavy storms left 200,000 households with out electrical energy. Native authorities estimate that extended rain destroyed or broken 50% – 70% of harvests, main them to declare a state of emergency.
What NEF’s modelling exhibits
Organisation for Financial Co-operation and Growth (OECD) projections present Lithuania’s GDP declining by 10% by 2050 and 14% by 2070 below present insurance policies. Our modelling exhibits the next:
- Beneath present insurance policies (BAU – enterprise as traditional), Lithuania’s debt is 48 pps increased than the climate-agnostic baseline in 2050 and 192 pps increased in 2070.
- With early EU mitigation and adequate adaptation spending, debt is 82 pps increased in 2050 and 172 pps in 2070.
- Delayed EU investments and inadequate adaptation leads to increased debt ranges of 63 pps in 2050 and 131 pps in 2070.
- EU early motion mixed with world cooperation leads to 15 pps increased debt ranges than the climate-agnostic baseline in 2050 and 5 pps increased ranges in 2070.
- Progressive taxation, corresponding to a wealth tax, mixed with EU early motion would enhance debt by 64 pps in 2050 and by 130 pps in 2070 in comparison with the climate-agnostic baseline.
Be aware that Lithuania is an outlier: early motion seems extra pricey than late motion. This displays top-down, assumption-heavy modelling and ought to be interpreted as illustrative quite than as forecasts. Adaptation prices allotted on the idea of GDP, CRI rating and inhabitants and find yourself massive relative to GDP: below an early motion situation, adaptation funding reaches round 3.8% of GDP in Lithuania. For all different nations it’s under 2%. In contrast, Lithuania ranks comparatively low by way of GDP losses from local weather harm below BAU.
Picture: iStock
