High inflation surprises analysts

VILNIUS - The annual inflation in March, which reached 3.8 percent, surprised analysts; however, this jump should have been expected and prepared for, says DnB Nord Bank Chief Economist Jakaterina Rojaka, reports news agency ELTA. According to her, it was “obviously” the rise of food prices that triggered this recent high inflation, though the phenomenon called ‘agro-inflation’ is a rather long-lasting one, thus, recently rapidly rising prices of energy and the increase of production costs contributed to the inflation rate quite significantly, too.

“Neither Europe, nor the Baltic States, in fact, were properly prepared for such a rise. However, this problem in small countries is a lot more acute, as they import the majority of goods, and we see that the share of imported inflation is sufficiently large,” said the economist. She said that one of the main reasons why inflation in Lithuania causes such resonance is the amount of income that residents spend for food, of which Lithuania is almost at the bottom in the European Union’s (EU) perspective. “Since it is food that influences the rise of inflation, in this respect, we are in a very unfavorable situation, because the share of income that we spend for buying food products is very large. If we looked at the European region rates, we surpass only Turkey, Romania and Croatia. If we counted EU member-states only, we would be very close to the bottom in terms of how much we spend on food. Therefore, inflation has direct effects on the residents of the country.

The same situation is with energy resources when, by using more of them, we start feeling the inflation,” Rojaka explained.
The expert said that the growth of inflation is inevitable due to the constantly rising food prices; however, she maintains that in the third and fourth quarter of 2011 the rate of inflation growth should slow down slightly. “This should happen because of the monetary policy that is being systematically implemented; we should not see any sharp rises as in the first half of this year. However, inflation will continue to rise,” Rojaka claimed.

Over the year, prices increased for food and beverages, transportation of goods and services, housing, water, electricity, gas and other groups of goods and services.