Lithuanian official consumer prices rise 0.7% in May

(VILNIUS) - Consumer prices in Lithuania rose at a slower pace in May, increasing by 0.7 percent compared with the level in April when they had climbed 1.0 percent, official data showed on Wednesday.

Inflation had begun picking up sharply in March in Lithuania, rising by 1.0 percent after gains of 0.1 percent in February and 0.4 percent in January.

Compared with the level in the same month in 2010, prices rose 5.0 percent in May, after a 4.4-percent increase on the same basis in April.

Lithuania's central bank governor Vitas Vasiliauskas warned inflation could hamper Vilnius's bid to meet its 2014 eurozone entry target.

"Inflation is that factor that will pose the biggest barrier," he said, quoted by the Baltic News Service (BNS).

"Based on our current forecasts, 2014 does not seem to be the year when we could think about the euro," Vasiliauskas said.

Vilnius failed narrowly to meet the criteria and adopt the euro in 2007.

Lithuania, a nation of three million that split from the crumbling Soviet bloc in 1990, boomed after European Union entry in 2004.

Robust domestic demand helped drive inflation to an 11-year high level of 12.5 percent in June 2008 but it then fell sharply as the global crisis battered Lithuania, with its economy contracting 14.8 percent in 2009.

The economy expanded by 1.3 percent last year as Lithuania's export markets recovered, but domestic demand lagged amid a biting austerity drive.

With consumption now rallying, Lithuania's finance ministry has forecast a strong revival this year with 5.8 percent growth.

Analysts have warned that inflation and unemployment -- which the central bank forecasts will remain at 15.5 percent this year -- could dampen the rebound.

Annual average inflation, a key measure for would-be eurozone entrants such as Lithuania, rose to 2.9 percent in May from 2.6 percent in April.

Lithuania's central bank forecasts annual average inflation of 3.8 percent for the full year.