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The BNS news agency asked 13 economists to assess the impact of rising energy prices on purchasing power, taking into account the mitigation measures envisaged by the government, rising wages and benefits.
Most experts believe that future price increases will affect groups of people differently, but government measures will not compensate for the increase in prices of goods and services, leading to a decrease in consumption.
However, one expert said that many residents will not be affected. According to him, Lithuanian households have never been so rich and resistant to such “inconveniences”.
Economists have also assessed the extent to which they believe gas and electricity prices on world markets may continue to rise. Some said prices could rise further this year, stabilizing later but staying high. According to experts, the situation will depend on economic, political and natural phenomena.
A jump in energy prices will increase inflation
Most economists have argued that a jump in energy prices will increase inflation, which will reduce the purchasing power of the population.
“The growth of wages and old-age pensions in Lithuania will continue to outpace the growth of prices for consumer goods and services, but higher inflation will worsen consumer expectations, likely to reduce consumer spending. households, so in winter we will probably not avoid a slowdown in consumption growth, “said Luminor.” Economist Sigismund Mauricas.
The experts also emphasized that the impact of more expensive energy will intensify when the price hike is felt in the raw material production chain. According to Asta Klimavičienė, a professor at the ISM University of Management and Economics and an expert in finance, buffer measures may not be enough; Furthermore, they will not compensate for the increase in the prices of goods and services caused by the increase in energy prices.
Tadas Sharapov, a professor at ISM University, noted that increasing the amount of tax-free income and the minimum wage will also help drive inflation.
Aleksandras Izgorodinas, an economist at the Brandonomika communications agency, believes that the impact on purchasing power will be, but the tense situation in the Lithuanian labor market and rapid wage growth will offset the rise in inflation.
“It is very real that this year the average salary in Lithuania will increase by about 10%, which means that wages will continue to grow faster than prices this year. In other words, the economic growth in Lithuania will offset the impact of the increase in energy prices in consumer finance, ”he said.
Tadas Povilauskas, an economist at SEB Bank, said that in the coming months the growth of electricity, natural gas and heating prices will exceed the growth of household income, and the government’s intentions will only halt the fall of the purchasing power.
The impact on the population will be different
According to economists, while the prices of consumer goods and services increase more slowly than wages and benefits, the purchasing power of the population is increasing, but some point out that economic development in Lithuania is uneven. Some argued that the biggest impact would be on the purchasing power of the lowest income earners.
According to INVL economist Indrė Genytė-Pikčienė, income and its growth rate, analyzed in different sectoral, professional, social or regional sections, are very different.
“Exacerbated inflation, when practically everything is rising in price, is difficult to avoid, so there will surely be a salaried population that has not been able to avoid the effects of inflation, hee.
Jonė Kalendienė, Head of Research and Analysis at Verslios Lietuvos, said the decline in purchasing power should be the greatest for people with the lowest incomes, whose homes are generally in the lowest energy class and whose incomes are not growing as much. Quick.
According to Laura Mociūnaitė, an economist at the Bank of Lithuania, this year and next will see wage growth more than double that of inflation, so people will be able to buy more goods and services. Also, as savings increase, the average population will not feel the impact of rising energy prices much.
“The average population should not face challenges due to rising energy prices, but for those whose spending on energy goods make up a larger part of the consumption basket, the situation can be more complicated,” said L. Mociūnaitė.
Guoda Azguridienė, head of research at the Lithuanian Free Market Institute, believes that the measures envisaged by the government will help only certain groups of the population, such as those living on benefits or those earning the lowest income. According to her, wage growth is also uneven across sectors, and if costs become unbearable for companies, they may not only fail to increase wages, but also lay off workers.
At the time, Swedbank economist Nerijus Mačiulis said that many people would not be affected by rising energy prices.
“The average salary is now 170 euros higher than a year ago, while the heating of an average apartment should increase by about 20 euros a month. It is true that the bills for some owners of larger and less energy efficient apartments will increase significantly, but even so this jump in the prices of energy resources is not something that can trip many residents, ”said N. Mačiulis.
According to him, the burden may be more difficult to bear for the unemployed, people with less income or the elderly, but they can receive compensation for heating and hot water. According to N. Mačiulis, in the basket of the average consumer, the costs of heating, gas and electricity represent only 6 percent. total costs.
“Of course, it is unpleasant to spend money on higher heating and electricity bills instead of the opportunity to save more or buy more generous Christmas gifts, but let’s face it, Lithuanian households have never been so wealthy and resistant to such inconveniences.” , said. N. Mačiulis.
Vilmantė Kumpikaitė-Valiūnienė, a professor at the Faculty of Economics and Business at Kaunas University of Technology, also stated that people more often notice an increase in prices because they are visually seen in stores and invoices, and the increase in Income is accepted as a gift and less attention is paid. paid them.
Energy prices may still go up this year
Some experts believe that world energy prices may still rise this year, stabilize later, but remain high.
Financial analyst Marius Dubnikov believes that prices are unlikely to rise sharply, but may not return to previous levels. According to him, even if they don’t change, they will already affect next year’s producer prices.
“It is very likely that we will have high prices and inflation in the first half of next year. Prices will stabilize later, they will remain high, but inflation may not be high. The situation could be reversed with the cold winter, when the Demand for energy resources would increase dramatically and we would have an even higher price level, ”he said.
According to A. Izgorodin, the growth of energy prices will continue at least until the end of this year. According to him, it is difficult to expect that the crisis in the supply of resources in Europe will be resolved soon, as gas storage facilities in Europe are the worst full in about ten years, the heating season is approaching and the demand for gas is growing. .
I. Genytė-Pikčienė also stated that current market imbalances, limited supply, depleted oil reserves and insufficiently filled gas storage facilities in developed countries ahead of the heating season do not promise rapid changes.
However, some economists have not predicted how long price increases may continue, depending on economic, political and natural phenomena that are difficult to assess.
“The growth in energy prices will probably depend more on the growth rate of the world and the major economies. So far, these prospects have only improved, but gradually they are beginning to show signs of rapid growth. Those signs are mainly accelerating inflation due to both energy and rising commodity and transportation prices may change the stimulus plans of governments and central banks, ”said J. Kalendienė.
T. Povilauskas believes that the situation will depend on what the winter is like, so participants in the electricity and natural gas market must prepare for various scenarios.
“If the winter is historically cold, in the end it may be necessary to buy gas in the international market at prices even higher than now and to such an extent (scenario – BNS) that the situation in the world will normalize by increasing gas production and warm in winter, “Povilauskas said.
According to him, energy problems can be solved, but it will take time; In his opinion, next spring the prices of natural gas and electricity will be much lower than at present.
“It’s just that in the second and third quarters of next year, Europe will have to replenish its already small natural gas reserves, which will prevent gas prices from returning to the level we were used to seeing so quickly in 2022,” said the Economist of the SEB.
A. Klimavičienė predicted that, in the long term, energy price growth will continue, albeit more moderate. At the time, Sharapov said prices could go up for a year or two.
N. Mačiulis says that price growth is over and they should start to normalize by the end of this year. According to him, the current jump in gas prices and the associated increase in electricity prices will be short-lived.
“When Russia announced that it would increase gas exports to Europe at the end of this year, we saw a decrease in its prices. There is no gas shortage in the world, so short-term supply disruptions will be corrected quickly. That is why , the considerations of some politicians on the temporary preferential VAT on gas or other measures that shift the burden from gas consumers to the entire population are a misunderstanding and should not be considered further, ”said the economist.
Ž. Maurice also believes that price growth is expected to stabilize in the near future, but there is a serious risk that they will remain high until spring 2022. According to him, the continued economic recovery and the coming winter will increase demand for electricity and gas in Europe, so it is difficult to expect the price of electricity to return to the pre-pandemic level in the near future.
L. Mociūnaitė stated that this year the market can still be expected to increase prices, but in the first half of next year they should decrease. According to her, the temporary impact of the rapid economic recovery and bad weather suggests that gas prices should fall in the future.
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