Annual inflation in Lithuania reached 20.5% in June, according to preliminary estimates by Statistics Lithuania.
Inflation was mainly influenced by an increase in the prices of foodstuffs and non-alcoholic beverages, housing, water, electricity, gas and other fuels, transportation.
The preliminary monthly change in consumer prices was 2.2% in June compared with May.
The indicators are calculated on the basis of the Consumer Price Index (CPI) harmonised with other EU countries.
Growing prices may have a dampening effect on consumption, economists say, which will be felt by business.
“We had already crossed the 20% threshold, that was to be expected, and now an important psychological threshold had been broken, because people liked round numbers and if someone had not felt the price changes yet, they were now obvious,” Marius Dubnikovas, financial analyst and vice-president of the Lithuanian Business Confederation, said on June 29.
“Such figures make people reconsider what to consume, why to consume, whether to buy or not to buy things. Inflation this high means that in the second half of the year we will see declining sales, and business will definitely feel it,” he added.
According to him, the 20% threshold is significant and is due to the rising cost of energy in Lithuania.
“It is surprising that we have not seen such a figure since 1996, it is a significant rate of inflation,” Dubnikov said.
Luminor Bank economist Zygimantas Mauricas says that inflation may get even higher in July due to rising electricity and gas prices.
“20% is a bit above expectations, I expected it to be exceeded in July – let’s not forget that gas and electricity will then become even more expensive, which means that inflation will be even higher and perhaps will start to decrease only in August,” Mauricas said.
Indre Genyte-Pikciene, an analyst at INVL Asset Management, noted that grain exports from Ukraine and the future harvest were a cause for concern.
“There are signs of concern for this autumn, because just in terms of food commodities, there is a lot of uncertainty about Russia and Ukraine,” she said. “What autumn will bring depends on a number of factors, which are no longer in the economic framework, but will depend on the results of the harvest, the weather conditions and the geopolitical environment.”
According to Mauricas, the high inflation rate increases the likelihood of deflation next year. It is already manifested in some markets, such as metals.
“The higher the inflation now, the higher the likelihood of deflation next year, and some early signs are already visible – metal prices have dropped significantly, and the rise in food prices will not last forever. We are in for a real roller-coaster ride,” he says. (LRT/Business World Magazine)
