Low inflation in Lithuania particularly favourable to euro adoption, economists say

Banks forecast that prices of goods and services in Lithuania after 1 January 2015 will increase by 0.2-0.3 percent on the average.

“In terms of inflation, the time for the currency changeover is particularly favourable. Lately, the price vectors on international food and energy resources markets have been going down, while our small and open economy has been importing these trends. There is not much stimuli for a price rise in the country either,” said Indrė Genytė-Pikčienė, the chief analyst of the DNB bank.

Lithuania’s Ministry of Finance predicts that average annual inflation in 2015 will stand at 1.2 percent, a similar rate to that of 2013. DNB give the same forecast, while SEB says that prices next year should grow even less, 0.7 percent.

“Inflation in the first months after the euro introduction will remain low. Its trends will most of all depend on the changes in prices of energy resources and the general deflationary climate in many European countries. Inflation will grow slightly because of rounding of prices after the euro adoption and higher excise duties for tobacco and alcohol from March. The growth of service prices in Lithuania ahead of the currency changeover probably means that there will not be any increase after the actual introduction of the euro,” said Vilija Tauraitė, the chief analyst of the SEB bank.