Lithuania prices static in November

Consumer prices in crisis-struck Lithuania were static in November, as the Baltic state recorded zero inflation for the third time this year after two months of rises, official data showed yesterday.

Increases in clothing and food costs were offset by a fall in the price of telecommunications, figures from Lithuania’s national statistics office showed.

Consumer prices had risen by 0.5 per cent in October compared with the previous month, and by 0.6 per cent in September, after having fallen by 0.3 per cent in August, while zero inflation was recorded in July and June.

Economists regard any last-ing period of deflation with concern as it can start a vicious spiral of falling prices, de-mand, investment and employment.

On a 12-month comparison, prices rose by 2.7 per cent in November, the same pace as in October. Lithuania, a country of 3.3 million people that split from the crumbling Soviet Union in 1990, had enjoyed a reputation as an economic “tiger”.

Robust consumption was fuelled by credit, rising wages and money sent home by hundreds of thousands of Lithuanians working elsewhere in the European Union, which the Baltic state joined in 2004.

Breakneck demand helped drive inflation to an 11-year high of 12.5 per cent in June 2008, compared with the previous year.

That burden led consumption to wither in 2008, then a real estate bubble burst, and the global crisis battered exports.

Lithuania’s economy contracted by 14.8 per cent in 2009 – one of the deepest slumps in the world.

Having emerged from recession, it is set to grow by 1.6 per cent this year thanks to an export recovery even though domestic demand will lag, Lithuanian authorities forecast.

Lithuania has been locked in a biting austerity drive.

One goal is to plug state coffers and thus help Lithuania to meet criteria for adopting the euro in 2014.

Besides getting public finances on an even keel, would-be eurozone members also have to keep inflation under control.

Lithuania failed narrowly to meet the inflation-control criterion in order to adopt the euro in 2007.

The eurozone measure is annual average inflation. In November, Lithuania’s rate rose slightly to 1.1 per cent from one per cent in October and 0.9 per cent in September.

Lithuania’s central bank has estimated that this year’s average will be 1.2 per cent, well below the eurozone bar.