January 12, 2008
Vilnius – The level of inflation in Lithuania fell to 8.5 per cent year-on-year in December from 9.1 per cent in November according to official figures released by the national statistics office in the largest of the Baltic states on Monday. The 12-month inflation average for the whole year stood at 10.9 per cent. Lithuania’s is the largest of the three Baltic economies and until recently was among Eastern Europe’s strongest.
Though it has yet to join neighbours Latvia and Estonia in recession, growth has been slowing and double-digit inflation has become a problem.
A new centre-right government under Andrius Kubilius was recently elected on a promise to sort out public finances and promptly embarked on a program of fiscal tightening in an effort to avert economic meltdown.
However, the decline in the inflation rate could be temporary according to Danske Bank analyst Violeta Klyviene.
The main drivers behind the changes were a drop in global oil prices and the effects of seasonal sales on clothing and footwear prices, she commented.
“It is obvious that slowdown in domestic demand has started to put more pressure on consumer prices. Looking ahead, we expect inflation to pick up again due to increased VAT, a hike in excise duties on fuel and rises in electricity and gas tariffs,” Klyviene said.