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Lithuanians spend more than 20% on food. Monthly household income. That is at least 7 percent. points above the EU average. At that time, the entire population of Europe spends most (almost a quarter) of income on housing and only spends up to 15% on food.
Even in neighboring countries, where the income of the population is similar to that of Lithuanians, spending on food does not represent the largest part of total spending.
Do we pay more or eat more?
Tadas Povilauskas, an economist at SEB Bank, says that the main answer to this question is the fact that the income of Lithuanians is on average lower than the average income of the economically stronger European Union countries. Thus, the impression can be formed that Lithuanians spend a disproportionate amount of their income on food.
“The lower the income of the population, the higher the share of spending on food. Given that household income per member in Lithuania remains one of the lowest in the EU, this relative share of food remains relatively high”, says T. Povilauskas.
However, the economist points out that in recent years, especially in 2020, a more pronounced change has been seen: food prices have risen more slowly than the income of the population, which has caused a slight decrease in spending on foods.
“This year we have a very strange situation, when we had a great pandemic challenge, but workers’ incomes continued to grow rapidly (in autumn, even more than 10%), pensions, children’s money increased, and due to the quarantine and various restrictions, the population spent less.
As a result of the suspension of trade in some goods or services, the population’s spending shares have also changed: the share of spending on food has increased due to pandemic conditions, but clothing, catering, food have decreased. accommodation and cultural services. But when the Covid-19 pandemic subsides, the population costs should return to previous proportions, ”says T. Povilauskas.
Vilnius University professor Romas Lazutka has a complex explanation for this moment.
“First of all, we have great income inequality. A significant part of Lithuania’s population has low incomes and food, as the main necessity, requires most of the expenses.
Another thing is that we have almost no food preferences, as in Western Europe, for example. Therefore, when evaluating the income of Lithuania, it can be said that food prices are relatively high ”, comments the expert on Lithuanian food expenditure.
Transportation also requires costs
Experts also note that a significant part of Lithuanians’ income is also required to maintain their own car. This is also reflected in a study carried out by Eurostat, during which Lithuania ranked third in terms of average transport costs of the population. Bank economist SEB T. Povilauskas mentions Lithuanians’ habit of driving an old car as the main reason.
“Lithuanians drive with a fairly old car fleet and the fuel consumption is relatively high, moreover, due to the old car fleet and the cost of car repairs are also relatively higher,” says the economist.
At that time, R. Lazutka named another factor. According to the expert, the poor public transport infrastructure in rural areas also has a significant impact on the popularity of the car itself in Lithuania.
“In the countryside, or in smaller towns and villages, public transportation is very underdeveloped – rare routes, stops from home – very far away, so people living in those areas simply need a car,” says R. Lazutka.
However, R. Lazutka points out that the causes of this problem must be sought in the distant past. “The competition of public transport with own cars started in the Soviet era, when people bought public cars and it became unnecessary.
Therefore, it is natural that over the years, as passenger flows decrease, less money is collected from passengers and such buses tend to run half empty. The maintenance of these routes costs too much to the municipalities and, therefore, it is being reduced. And as there are fewer and fewer, more people choose to buy their own car, and a vicious circle is taking place ”, says the expert.
Significantly less is spent on housing
Thus, if, after adding transport and food costs, Lithuanians spend a little over a third of their income on primary needs, then housing maintenance in Lithuania is probably the cheapest for the population of Europe. According to the economist R. Lazutka, this is due to several things.
“Most of the Lithuanian population have their own home. This is mainly due to the fact that many apartments were privatized after the Soviet era. At that time, in Western Europe, this is less common, a significant part of the population lives in rented housing. As a result, their costs are higher, since a large part of the population pays rent.
Also, as in Lithuania, there are residents who pay a mortgage loan, only that part is higher, so its costs are also counted as the costs of maintaining a place of residence.
The next point is that in foreign countries, these rented homes tend to be more spacious and luxurious. In Lithuania, for example, there is on average almost twice the living space per capita than in Western Europe. Larger housing areas are, of course, larger, so they are more expensive to maintain, ”says R. Lazutka.
Bank economist SEB T. Povilauskas adds another reason for lower housing costs in Lithuania. “The price of electricity and natural gas in Lithuania is one of the lowest in the EU; it also contributes to lower housing costs compared to other EU countries,” says the economist.
However, experts are convinced that the situation in Lithuania is improving rapidly: the average salary is growing and, therefore, the expenses of the population in one or another area of life are stabilizing.
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