Inflation hits Lithuania, will grow

VILNIUS - As expected, January consumer prices in Lithuania soared to 1.5 percent, topping the Baltic States. This inflation comes on the heels of several months of deflation, and was driven mainly by increases in energy costs.

According to a report by the Department of Statistics, consumer price indexes were 1.5 percent higher in January than in December. Prices for housing, water, electricity, gas and other fuel went up by 9.3 percent altogether, although electricity and natural gas rose 30.2 percent and 25 percent respectively.

Rasa Morkunaite, director of the Economic Research Center, says that not only did the government expect the inflation, but it ensured it as well.

"Inflation will grow because heating and water costs are going up. It happens usually but this time it was because the government had taken some measures to increase these prices because of problems in the budget."

The Economy Ministry says that adjustments had to be made to the energy budget.

"Electric energy costs have not been changed for several years," said Jonas Oskinis, assistant to Economic Minister Valentinas Milaknis. "As officials from the economy strategy department have stressed, this trend was foreseen and is treated as a normal, accepted occurrence after a number of deflation months and should not affect the prognosis on the annual 2000 inflation rate of 3.5 percent."

However, the government expects inflation to grow even more because of the Lithuanian phone company's rate hikes.

"For the next few months, the inflation trends should be affected by the rise of telecommunications tariffs, namely, these of Lietuvos Telekomas," said Oskinis.

What makes the inflation worse is that the average income in Lithuania is decreasing.

"The net payments of salaries have, unfortunately, decreased together with the rise of Social Insurance payments, from one to three percent," Oskinis added.

Also sure to have a negative effect on Lithuanian pocketbooks are increases in wholesale prices for fuel provided from oil company Mazeikiu Nafta. On Feb. 9 the company announced that a ton of petrol went up by 36 litas ($9) and diesel fuel.