Agriculture, Analytics, Foodstuff, Inflation, Lithuania, Retail, Statistics

"Oil prices took a significant plunge due to the coronavirus, leading to lower fuel prices, which had considerable impact on slowing inflation. We also see a fairly big price drop in separate food segments, first of all, vegetables," Izgorodin told.

In his words, vegetables prices were also affected by the coronavirus pandemic as vegetable demand dropped last spring when Lithuanian hotels and restaurants closed, therefore, producers have been trying to sell it for less.

"Vegetable growers faced the fact that they had good supply but very limited demand, therefore, they tried to get rid of them as cheaply as possible or sell their produce on the internal market. It might happen so that there was an influx of vegetables from abroad. It might be so that Poles who have the same problems as Lithuanians, as demand also dropped there due to lockdown, so it might be so that that foreign produce also flooded Lithuania, leading to increased price competition," the economist said.

Nevertheless, he says, a low inflation rate is a dangerous phenomenon for Lithuania's economy as it might reduce internal consumption.

"The fact that we have a low inflation rate is good and bad at the same time. It's good because there's no pressure on people's purchasing power. But it's bad because deflation and the likelihood of it is totally the worst think Lithuania's economy might face. It might happen so that, as prices drop, people will stop consuming and will start waiting for prices to drop further. Then businessmen will reduce prices further but people won't consume as they will wait for prices to drop further," the economist explained.

A normal annual inflation rte should stand at around 2%, Izgorodin said.

Lithuania's monthly inflation rate as measured by the EU Harmonized Index of Consumer Prices (HICP), is estimated at 0.4% in June.

The estimated annual inflation rate, as measured by the EU Harmonized Index of Consumer Prices (HICP), stands at 0.8% the latest figures from Lithuania's statistics office, Statistics Lithuania, showed on Monday.