Lithuania’s record inflation affects savings and pay rises, experts evaluate

Eurostat’s estimates that Lithuania has experienced the highest inflation in the euro area – 9.3% – from November 2020 to November 2021, has turned attention to the effects rising costs have had on recent pay rises and savings, Lithuanian public broadcaster LRT and journalists Irma Janauskaitė, Jūratė Anilionytė and Vesta Tīzenhauziene report.
This is according to the preliminary estimates of Eurostat on the basis of what Lithuania has reported. In the euro area on average the estimates for the same period were 4.9%.
LRT reports that Lithuania is likely to see double-digit annual inflation by the end of 2021.
«Inflation this monstrous was only seen before the big recession of 2009, when Lithuania’s economy was in overheat and we had real estate, consumer, and credit bubbles,» Indrė Genytė-Pikčienė, an economist with INVL Asset Management, tells LRT TV.
While energy and fuel are the main drivers of inflation, price increases are passed on to other goods, including food.
Read also: Inflation in euro area reaches record 4.9%, highest – in Lithuania
Although wages in Lithuania have also been growing, many workers may see their gains eaten away by inflation.
«The argument that salaries and incomes have been outpacing inflation does not always stand,» according to finance analyst Marius Dubnikovas. «Some people have not even seen any changes to their wages – and 10-percent inflation means that their purchasing power is melting particularly fast.»
Better-off Lithuanians are also concerned about inflation, which will eat away part of their savings.
«Lithuanian residents have about 20 billion euros in their current accounts,» says Dubnikovas. «And with 10-percent inflation, this means that we’ll lose 2 billion euros of purchasing power in one year, which is a lot.»
Economists expect inflation in Lithuania to stay high until at least mid-2022. It is expected to abate later, unless the economy is disrupted once again by another Covid-19 wave.
The article originally appeared on LRT English: