Returning from the head banker meeting in Frankfurt recently, the head of the Bank of Lithuania Vitas Vasiliauskas states that wage growth in Lithuania is, on one hand, a positive factor, however on the other hand if it exceeds competitiveness, it ceases to be a benefit. “Then you enter a phase of stagnation. It is important we do not get caught in the middle income trap,” says V. Vasiliauskas.
According to the Bank of Lithuania board chairman, currently the level of prices in the Eurozone is changing little, but the situation in the Baltics is different to the rest of the Eurozone. This, he explains, is linked to domestic policy nuances.
“Last month’s inflation was 3.5%, similar to that in Latvia and Estonia. The main aspects linked to the largest inflation in the Eurozone are linked with our domestic policy questions, primarily raising excises and the removal of the VAT exemption for heating. This led to roughly an extra 1% inflation,” V. Vasiliauskas explains.
According to him, currently wages are growing much faster in Lithuania than the rest of the Eurozone, increasing by 9% annually. V. Vasiliauskas notes that this, no doubt is a positive matter because through it we can expect a positive impact to the country’s demographic situation, the country’s main issue. On the other hand wage increases should not exceed competitiveness.