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Wednesday, March 12, 2008

Lithuania Inflation February 2008

Lithuania's inflation rate rose in February to its highest rate in 11 years, led by food and natural gas costs. The annual rate rose to 10.8 percent, the highest since February 1997, from 9.9 percent in January, the Vilnius-based statistics office said today. Prices rose a monthly 1.1 percent, compared with a monthly gain of 1.6 percent in January.

All three Baltic states - Lithuania, Latvia and Estonia - are struggling to control inflation triggered by rapid economic growth, labour shortages and a consumer spending boom. Inflation in the Baltic countries is three times faster than the 3.2 percent pace of the 15 countries sharing the euro.

Housing costs such as gas, heating and water rose an annual 17.4 percent, the steepest gain of any category in the index. AB Lietuvos Dujos, a Lithuanian natural gas utility, has raised prices for household consumers by 62 percent since January as a result of the rising price for gas imports from OAO Gazprom.

Food prices, the biggest item in the consumer basket with a 26 percent weighting, rose an annual 17.2 percent. Meat, bread and pastry prices increased the most from the previous month.

Current Account Deficit

In a separate data release Lithuania's central bank announced that Lithuania's current-account deficit widened in January from December largely on crude oil imports.

The deficit widened to 394.6 million euros ($613.7 million), up from 254.5 million euros in December.

Lithuania's trade gap has been steadily widening as the boom in consumer demand has increased imports of goods, while continuing inflation has made domestic products less competitive. Lithuania must narrow the deficit to reduce the risk of some sort of financial turmoil accompanying the ending of the period of economic overheating.

Exports grew 4 percent in January from December, while imports increased 7.2 percent month on month led by crude oil, the statistics office said on March 7.

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