Macroeconomic Forecast Lithuania

December 2005 | Macroeconomic Forecasts

Inflation is on course to average about 2.7% in 2005 compared to 1.2% in 2004. Oil prices are largely to blame for the acceleration in prices and underlying inflation remains low at just over 1%. Provided wage growth stays broadly in line with productivity and oil prices stabilise, headline inflation should decline to about 2.4% in 2006. This suggests that Lithuania would be able to join the eurozone in January 2007. Upside risks to inflation are significant, however, as the economy is operating at capacity, skilled labour is in short supply (suggesting that real unit labour costs could be bid up), and gas tariffs are to be hiked by an as yet unspecified amount

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