despite continued economic growth, the start of the year should be difficult for the population

The review was prepared in accordance with the Ministry of Finance (MoF), the Bank of Lithuania (LB), and SEB and Swedbank at the end of 2021. economic forecasts presented.

Ministry of Finance: Wage growth will outpace inflation

One of the main messages of the Ministry of Finance for next year is that the increase in the income of the population will exceed the projected inflation, therefore the purchasing power will not decrease. The latest economic development scenario of the ministry envisages 9.7 percent. growth of average monthly earnings (VMU) on paper in 2021 and 9.3 percent. next year.

According to the ministry, this year the salaries were mostly increased by the increased demand for employees, the shortage of qualified specialists and the increased salaries of public sector employees. Next year’s pay rise will be largely driven by a rise in the minimum monthly wage (MMA) to € 730, rising incomes for teachers, doctors and other public sector workers, as well as the general labor market situation.

By the end of this year, the Ministry of Finance estimates that average annual inflation will be 4.5 percent, and in 2022, when energy prices stabilize, it should slow down to 4 percent. According to the Minister of Finance Gintarė Skaistė, two thirds of the price jump is caused by external factors, first of all – record prices of energy raw materials. However, service price inflation, driven by growth in MMA and VMU and strong demand, will have a relatively larger impact on the price level.

According to the Ministry of Finance, from 2020 the unemployment rate in the country fell by 1.4 percent. points – up to 7.1 percent, and the number of employed increased by 0.8 percent. Even better indicators are forecast for next year.

“The employed population is expected to increase by 0.6% in 2022, and the unemployment rate will fall to 6.4%. Thus, in 2022, both the unemployment rate and employment rates will reach pre-pandemic levels, ”the ministry said.

At the end of the year, the Ministry of Finance also updated its GDP forecast: the Lithuanian economy is expected to grow in 2021. GDP will grow by 4.8% by the end of 2010, by 3.7% next year and by 3.5% in 2023-2024. every year.

Bank of Lithuania: The issue of staff shortages will remain sensitive

In its projection, the Bank of Lithuania is pleased that the country’s economy has weathered the pandemic in an exemplary manner, but warns of deepening staff shortages and inflation problems. According to LAC experts, although unemployment rates have almost returned to the pre-pandemic level, there have been mostly vacancies in Lithuania in 13 years.

“The problem of labor shortage in the Lithuanian economy has become extremely acute again. And this is one of the most important reasons for the extremely rapid rise in wages: in the third quarter of this year, it rose by 9.9% year-on-year, ”the LB review said. 2022 the bank forecasts 8.2 percent. VMU growth.

Its specialists, like the Ministry of Finance, point out that only about a third of inflation, which was almost double-digit at the end of the year, is determined by factors related to Lithuania’s domestic economic development. According to LB, a long-standing rise in prices is observed around the world, due to disrupted global trade chains and rising commodity prices, which are expected to stabilize in the first half of next year.

According to the LAC calculations, the average annual inflation in 2021 will reach 4.5 per cent – 3.4 per cent. more than a year ago. 2022 inflation will be 5.1 percent. LB experts predict that although inflation will remain high in 2022. at the beginning, it should suppress in the second half.

LB’s forecasted GDP growth in Lithuania will reach 5.1 percent. 2021 and 3.6 percent. next year.

SEB: A peak in prices awaits at the very beginning of the year

According to SEB forecasts, the beginning of the year, when the price jump will be the highest, should be difficult for the population. The bank estimates that the peak of inflation is expected in the winter and will reach about 10% in the first month of next year: then the price of electricity may increase by about a tenth and natural gas by a third.

However, energy prices in the international market will be significantly lower from next spring, which will dampen the rise in prices in the second half of next year, SEB experts believe.

According to their calculations, the average annual inflation in 2021. In Lithuania, it will be 4.5 percent, next year it will increase to 5.4 percent, and in 2023 it will reach 2.3 percent.

The latest forecast of one of the major commercial banks in 2022. Vytautas Magnus University will rise by 8.7 percent. This will be affected by 13.5 percent. MMA will grow, with strong demand for workers remaining next year, which will force employers to raise wages. The increase in the tax-free income from the new one to EUR 460 will, according to SEB economists, have a positive effect on the income of the lowest earners.

Higher prices and rising costs for heat, electricity and gas are expected in 2022. At the beginning of the year, the consumption habits of the population may change, and the purchasing power of the lowest earners may decline in the first quarter of next year. However, higher spending on services is forecast for next year, and residents will be less likely to save.

“Next year, the savings rate of the population will decrease and the desire to spend will remain high, so even an increase in the price of goods will make 2022 a good year for traders, when it will not be very difficult to raise prices for consumers,” says SEB’s economic review.

Unemployment rate forecast by the bank’s economists in 2021 will be 7.1 percent and will drop to 6.5 percent next year. Lithuania’s economic growth forecast is similar to that of the Bank of Lithuania: this year the country’s GDP will have grown by 4.9 percent. 3.6 per cent is expected in 2006 and 3.3 per cent a year later. GDP growth.

Swedbank: A good life can lead to a supply crisis

In its review, Swedbank notes the continued growth of the Lithuanian economy, which would be hampered by the lack of supply due to the growing purchasing power of the population, which the bank’s chief economist Nerijus Mačiulis has called a “good life crisis”.

According to him, the biggest concern for some consumers is not the rising prices, but the stagnant demand for new goods, for example, without waiting for the latest car or smartphone model. Record income and savings are boosting consumption that supply cannot meet, leading to unprecedented highs.

However, according to the economist, part of the society feels only the negative consequences of economic prosperity, when more income has to be allocated to cover the significantly increased bills for energy and goods and services.

Swedbank estimates that after 2021. the country’s economy will grow by 5% by 2022. will rise by 3.3 percent, and growth will remain similar after another year. This year, the bank has forecast 11 percent. increase in salaries, forecasts 8.4 percent for next year. VMU carpet.

Meanwhile, average annual inflation, according to Swedbank experts, will remain at 4.4 percent next year. riba. Swedbank has no doubts about the rapidly growing salaries and the pensions that will rise from the new year, as the purchasing power of many will increase.

Next year, the unemployment rate, according to the bank’s calculations, will decrease from 7 to 6.5 percent, and employment will change from 1.2 to 1 percent. Nevertheless, the bank’s experts agree that the shortage of staff will be felt even more than this year.

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