Inflation dip little comfort for weary Baltic consumers
(VILNIUS) - Shouldering the heaviest inflation burden in the EU, consumers in the Baltic states of Lithuania, Latvia and Estonia are fed up, drawing little comfort from official data showing price rises are slowing.
"I wanted to buy some berries. A kilo used to cost four litas (1.16 euros, 2.67 dollars), but now its six," said Birute Jakubaviciene, trailing along market stalls of the Lithuanian capital Vilnius.
Such sums may not look astronomical to Western consumers, but Jakubaviciene has to get by on a monthly pension worth 190 euros.
The average salary in Lithuania is 623 euros.
"I always look out for cheaper stuff. I hunt for special offers near where I live. I can't go far because I have a bad leg. I used to eat butter, but it costs 15 litas a kilo, so now I only eat margarine," Jakubaviciene told AFP.
"I don't have a job on the side, because of my health. I'm nearly 80," she said.
Lithuania, a country of 3.4 million people, joined the European Union 2004 along with neighbouring Latvia and Estonia, 13 years after breaking free from the crumbling Soviet Union.
All three countries restructured to become market economies after independence, earning a "tiger" reputation for outstripping West European growth rates, but are now cooling as breakneck consumption tails off.
Recent inflation data has offered a ray of hope, albeit too little to please disgruntled consumers.
In July, Lithuania's 12-month inflation was 12.2 percent, down from 12.5 percent the previous month, which was the highest figure on record since January 1997.
Consumers in the EU's ex-communist states are generally harder hit by current global price rises than their Western counterparts, said Rimantas Rudzkis, a senior analyst at the bank DnB Nord.
"The share of food, fuel and heating in our budgets is much higher than in more developed countries. And it's precisely those goods whose prices have risen most," he told AFP.
Inflation has also been driven by local factors such as rising wages, easy credit and money sent home by migrants -- 200,000 Lithuanians have left to work in western Europe, mostly in Britain and Ireland, since 2004.
"When consumption rises too suddenly, that creates ideal conditions for price rises," Rudzkis said.
Alvita Armanaviciene, head of the Lithuanian National Consumers' Association, said that food now represents a quarter of spending and home heating, when the bitter Baltic winter bites, a third.
Rudzkis said inflation should decline further over coming months as more and more Lithuanians tighten their belts, leading to falling consumption which has dented growth and further harmed consumer confidence as a result.
"But we shouldn't count on a rapid fall in inflation," because of planned energy price hikes later this year, he said.
Lithuania's economy grew by 5.5 percent in the second quarter compared with the same period of 2007, after 7.0 percent in the first three months.
The economy grew 8.8 percent in 2007. Lithuania's central bank forecasts a still-solid 6.0 percent this year.
The situation is little better for the 1.3 million people of Estonia.
There, inflation in July was 11.1 percent, dropping from the 10-year high of 11.4 seen in previous months.
"My pension after a working life of over 30 years is 4,100 kroons (262 euros, 405 dollars), and I have to pay out around half of that for my two-room apartment during the seven-month heating season," said 67-year-old Marje, who did not give her last name.
"Life is not easy, but I try to manage. I choose what I buy carefully," she said.
In the first quarter, Estonia's economy grew by just 0.1 percent.
The Estonian central bank forecasts 2.0 percent growth this year, after 7.1 percent in 2007.
In 2006, the economy boomed with 11.4 percent growth, the fastest-ever rate since independence.
In Latvia, inflation dropped in July to 16.7 percent, the second consecutive decrease after more than a year of rises which saw a 12-year record of 17.9 percent in May.
But the fall has brought little comfort to the country's 2.3 million people.
"It's becoming harder to live... When they say on the news that prices are going up yet again, I'm not sad or angry. I'm overcome by apathy," said travel agent Maris Zabarovskis, 31.
Growth in Latvia all but stalled in the second quarter as output expanded 0.2 percent.
Latvia's central bank forecast 2.5 percent growth this year, after 10.2 percent in 2007. Latvia had topped the EU table with 11.9 percent growth in 2006.
Text and Picture Copyright 2008 AFP. All other Copyright 2008 EUbusiness Ltd. All rights reserved. This material is intended solely for personal use. Any other reproduction, publication or redistribution of this material without the written agreement of the copyright owner is strictly forbidden and any breach of copyright will be considered actionable.
