Lithuania fears inflationary fever

  • 2005-11-23
  • From wire reports
VILNIUS - Finance Ministry official said that average annual inflation amounted to 2.3 percent over the past six months 's slightly below the Maastrict limit 's while analysts were quick to point out that the rate as of October was 2.7 percent, or over the limit necessary to adopt the euro. Ricardas Kasperavicius, head of the ministry's macroeconomic unit of the fiscal policy department, said that the estimate of the Maastricht criterion (2.6 percent) was based on the assumption that a report on Lithuania's readiness for the euro would be prepared next June, and that the latest available inflation data would be for April 2006.

"The average annual inflation rate for the preceding 12 months would then cover the period between May of this year and April of next year. Half of this period has passed," he said.

Alge Budryte, chief analyst at SEB Vilniaus Bankas, noted that there were another six months to go, and that it was not clear yet if the report would actually be published in May or June of next year. "Based on the October indicator, the average annual inflation rate in Lithuania was 2.7 percent, exceeding the Maastricht criterion, which was 2.4 percent. Unfortunately, there is still a risk that we will miss the established criterion," she said.

Budryte added that SEB Vilniaus Bankas expected the Maastricht criterion to be close to that projected by the Finance Ministry. The bank estimates that the criterion will be 2.6 - 2.8 percent in mid-2006, while Lithuania's average annual inflation rate is forecast at 2.5 percent.

To comply with Maastricht, Lithuania must keep its inflation rate within 1.5 percentage points of the three best-performing EU countries.

In the meantime, Parliament's budget and finance committee urged the government to raise public spending as scheduled for 2006 by 116.5 million litas (33.7 million euros), or 0.6 percent of total spending.