Government size in Lithuania is very moderate by European standards, with government expenditures reaching 34,6% of GDP in 2015. The strong fiscal austerity package, put in place after the 2009 recession spillover to Lithuania, with its significant cuts in public expenditures, contained high public deficits and finally led to a balanced structural fiscal position in 2015. However, this newly acquired fiscal space should not be taken for granted, due to necessities to build potential fiscal buffers and tackle future liabilities due to demographic changes. Economic growth which slowed down in 2015, due to weak external position caused by a downturn among major trade partners, is expected to pick up next year. Public debt, although highly elevated as compared to pre-crisis times, remained
within the Maastricht criteria, at 42,8% of GDP in 2015. The moderate level of government spending is a result of low government involvement in the economy and relatively low social transfers, allowing for more favourable taxation levels. Lithuanian tax system is flat, with some minor progressive characteristics – personal and corporate income tax are set at 15%. VAT has a standard rate of 21%, and the reduced rate of 9% and 5% for certain products, while the excise duties on tobacco, alcohol and energy are among the lowest in the EU. However, tax wedge on labour is still significant due to high rates of social contributions. The Lithuanian state has largely exited the market, and most of the state-owned enterprises were privatized. The government remains involved in the economy mostly by public utility companies, and through enterprises in the trasportation sector: the railway company, the postal service and 3 international airports. Apart from companies that are in monopoly status, private companies do not face restrictions in their competition and dealings with SOEs. Management of these state-owned companies is not fulfilling high professional standards and is sometimes politicized.