Banks, Financial Services, Lithuania

The changes between the formation mechanisms of goods sensitive for foreign competition and services resistant to it became even more visible in April: the growing competition forces to reduce prices and the tariffs of the service sector oriented only towards local residents are less subject to change in the light of the economic recession. In April, compared to March, the monthly inflation dropped 0.1%. Annual inflation in April totaled 6.3% and average annual equaled 9.9%. According to the data of the Lithuanian Department of Statistics, in April the changes in general consumer prices mainly resulted from a decrease in the prices of transport group services and goods by 1.4%, food products and non-alcohol beverages by 0.5% as well as an increase in the prices of alcohol beverages and tobacco products by 3.2% and readymade apparel and footwear by 0.9%.

Meanwhile, Western countries witnessing drastic reductions of prices already register records in price indexes: annual inflation in the euro zone totaled 0.6% in April and was the lowest since the introduction of the calculation of this index in 1996.

The analyst warns that the prices swing can again start moving – the combination of growing major countries budget deficits, sudden growth of money aggregation and reducing inflation base can cause a new wave of inflation in the world in the future. "If this scenario comes true, Lithuania, which imports a lot of sources, the prices of which will also go up, may again face serious challenges in arrest of price level. This can make the project of the joining of the euro zone even further," Rojaka says.