Food prices remain stubbornly high in Lithuania. The annual price change stood at 36% in November. Economist Tadas Povilauskas thinks the government could initiate a study to look into whether all the price rises are justified by costs.
The annual inflation rate for food and non-alcoholic beverages in Lithuania is almost 35.6%. For food alone, prices rose by 36.1%, according to data from Statistics Lithuania.
In the last month alone, food prices rose by 2.5%.
“In November, the rate of inflation neither slowed down nor accelerated. It has been steadily high,” notes Tadas Povilauskas, an economist at SEB Bank.
Prices rose for bread, meat, fish, milk and other products, while vegetables and fruit became slightly cheaper. The Ministry of Agriculture, which monitors prices, announced back in the summer that food prices were rising because of higher production costs.
Economist Povilauskas believes Lithuania could benefit from measures used by the Swedish government, which has commissioned a study looking into whether or not food price inflation is really only due to more expensive raw materials, energy prices and labour costs.
“Have the intermediaries put up their mark-ups out of caution? Or is it, as some insist, because of greed,” he says
The study in Sweden showed that inflation could be explained by rising costs. A similar study could make the debate in Lithuania more informed as well, Povilauskas believes.
“At the moment, it’s only speculation and people’s dissatisfaction. The government’s job is probably not to interfere in the market, but to give more information and better understanding,” says the SEB Bank economist. “We understand that the Lithuanian government will not regulate mark-ups or anything like that.”
The economy minister, meanwhile, says that the government is already doing what it can to shield the population from inflation.
“If it weren’t for the energy subsidies approved by the government, it is likely that prices would be even higher,” says Ausrine Armonaite, of the liberal Freedom Party. “Of course, the reasons [for rising prices] need to be clarified, but our measures will be exactly the same – to cushion energy cost spikes. And to make the future at least somewhat more stable.”
According to Energy Minister Gintare Skaiste, however, companies could be shifting all the additional costs onto final consumers.
“Naturally, energy costs spill into other sectors. But we can see that companies are maintaining high profit margins, so it is likely that they are passing on most of the additional costs to consumers,” she says. “Therefore, I think some analysis would make sense, if the Competition Council were to initiate analytical work.”
The Competition Council says that it will consider including the question into their more in-depth market studies.
Some economists say that lower prices can be expected in spring. And food should stop rising already this month.
However, some traders say that they cannot afford to raise prices, because shoppers are saving.
“They look where the sausage is cheaper and where it is more expensive. We didn’t raise prices of anything we sell,” says Regina, a meat seller at the Naujasis Turgus market in Klaipeda. “We are taking away from ourselves to have a buyer.”
“People can’t afford things, they are too expensive,” says Lina, another seller.
Viaceslavas Karmanovas, the director of Naujasis Turgus, said prices in similar markets did not increase as much as in big supermarket chains. Still, people are buying noticeably less.
He hopes sales will improve in the second half of December, when customers go on a Christmas shopping spree. After the holidays, however, he expects a lull.
“It begins after January 10 more or less. Not only in our market, but all over Lithuania, consumption will go down. This may continue until spring,” says Karmanovas. (LRT/Business World Magazine)
