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According to Marius Dubnikov, vice president of the Lithuanian Business Confederation (LVK), deflation would be a danger.
“From our organization’s point of view, deflation is completely unacceptable, it is a great threat to both goods and services and we must avoid it as much as possible. Inflation would like to see around 2 to 2.5 percent. which would encourage trade in both services and products. Only on the condition that it is a sustainable level, “Dubnikov said at the” ECB listens “event on Tuesday.
According to him, there is a fear that inflation could become “not the engine, but the enemy” in the future, so it should be sustainable.
Arlauskas: There are doubts about the ECB’s objective of maintaining 2%. inflation
Danas Arlauskas, director of the Lithuanian Employers’ Confederation, says he doubts that the ECB’s goal is to keep 2%. This year’s inflation is the appropriate instrument to support the region’s economy.
“That inflation is 2 percent. (…) it will boost the economy, we have doubts about whether it is a key instrument that can shake the economy. (…) Changing the fiscal and tax environment is something that can shake the economy more. economy, it seems to me that it is somewhat healthier, “he told the ECB at the event.
Mr Arlauskas pointed out that he would see some of the measures chosen by the ECB, which aim to raise inflation in the EU to the desired 2%. limits, inefficiency.
He also claimed that due to the cheap money policy, Lithuanian companies in the EU are becoming uncompetitive.
“We live in a paradoxical situation of very cheap money. But that cheap money is very interesting. If you put them in the bank, you get almost nothing or with negative interest. But if you need to take out a loan, then in Lithuania such money is more expensive than in Europe.
In this case, Lithuanian companies are very uncompetitive, “he said, adding that according to personal calculations, companies in Lithuania pay 1.5 percent for loans, more expensive than many EU countries.
Anxiety about the impact on the poor
At the time, Simonas Gurevičius, director of the Maisto Bankas Charity and Support Fund, said that when considering inflation indicators, it is necessary to assess how this will affect the poor.
“It is important that central banks, when considering possible inflation indicators, also assess not only the economic impact, but also the impact that these indicators will have on people living in poverty or simply the poor.
Generally speaking, rising prices, unemployment or declining purchasing power of individuals directly affect our daily operations. We are currently receiving many more requests for food aid. Inflation, and in particular its forecast, is of course also linked to unemployment. People who do not have a job or are in a period of forced inactivity face economic difficulties, ”said S. Gurevičius.
According to him, the pandemic crisis has shown that as the economic situation deteriorates, several people are forced to search for food and some of them are doing it for the first time. According to him, among them there are not only single or large families, but also families with both parents and two children, but the income received is not enough to meet the basic human need for healthy food.
It is necessary to increase investment
Titas Budreika, an expert from the Department of Economics and Business Environment of the Confederation of Industrialists of Lithuania, said that one of the main challenges faced by Lithuanian industrial companies over the past 5 years is slow productivity growth and high cost growth.
“When the growth of wages exceeds the growth of labor productivity, production costs increase and one of the consequences is the decrease in the competitiveness of Lithuanian industrial companies. This situation has arisen due to the relatively rapid implementation of the policy of increasing the monthly minimum wage in recent years, generally due to the shortage of workers in the labor market at least before the pandemic, which encouraged employers to compete for workers and raise wages, ”Budreika said.
According to him, labor productivity can be increased by investing in increasing production volumes, modernizing equipment, robotics, but during the pandemic, companies tend to save.
“Last year, investments fell more than 24% in three quarters compared to 2019, but even before the pandemic, the situation was bad enough. In terms of investment in relation to GDP, we were in 15 of the 27 countries ”, said the expert.
According to him, when saving money generates a small return or, as in this case, negative in some cases, the policy of keeping interest rates low encourages both companies and individuals to invest and consume, but in the case of Lithuania, according to T Budreika, this is not enough.
“Some additional national measures are needed to provide incentives for companies to invest more. One of the ideas of the national section: 0 percent. Income tax rate on reinvested earnings. We understand that the loss of the state budget would be quite large, but perhaps it would not be possible to talk to all companies, only innovative companies are covered by such an exemption ”, said the expert.
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