Economists warn that the coming autumn and winter should be spent preparing for hard times: unemployment and bankruptcies are likely to increase, as wages are set to stagnate. The Food Bank is already reporting an increase in demand.
Emilija from Panevezys in northern Lithuania adds 500 euros to her retirement pension by selling flowers. Now, she has had to give up certain foods due to soaring prices.
“Meat is becoming expensive and milk has gone up in price,” she said.
The number of people like Emilia is growing. According to Simonas Gurevicius, head of the Food Bank, even bread is becoming scarce for the most deprived.
“In the past, some would leave bread for someone who needed it more,” he says.
Now, people take everything they can.
In an attempt to curb inflation, the European Central Bank has raised its interest rate by 0.25% and is expected to raise it further in September. This means that loan repayments will increase.
According to credit history information bureau Creditinfo, most people are able to pay, though an increasing number are behind with their payments.
“In the municipal sector, the number of debts is growing – the number of debtors themselves is slowly increasing. It can be clearly linked to the change in electricity and heating prices,” says Aurimas Kacinskas, head of Creditinfo.
Gediminas Simkus, board chairman of the Bank of Lithuania, says there is no economic recession yet, but inflation has a huge impact on the population.
“The forecasts for the Lithuanian economy are for growth of around 2%. Of course, inflation is at a level that is not satisfactory. It is high and it is having an impact because of the increase in prices,” he adds.
Lithuania’s Statistics Department also said housing prices rose by a fifth in the first quarter of this year, compared to last year.
Economists are now predicting a difficult winter.
Meanwhile, Indre Genyte-Pikciene, chief economist at INVL Asset Management, says the effects will become obvious even sooner.
“It is possible that we will see an annual recession. This year, Lithuania is facing an inflation shock, a war in the neighbourhood and the risks associated with it – many companies will refrain from investing, postpone spending for better times. People will review their consumption habits and housing options,” she says.
Experts are calling on people to amass savings worth at least six months of income.
Many, however, have nothing to save in the first palace.
“Everything is getting more expensive,” says a man spoken to by LRT TV. “Your pockets are empty, what will you save?”
“Now I’m suffocating, I don’t have anything else to add,” says a senior citizen.
A young woman interviewed on the street says she has been preparing for a possible recession – “it is only a crisis that makes those who have not saved anything think again.”
According to the Statistics Department, year-on-year inflation in Lithuania reached nearly 19% in May. (LRT/Business World Magazine)