News2019.08.06 16:00

Lithuania’s fight against high supermarket prices so far ineffective

The Lithuanian government’s measures to tackle high prices that began in 2019 have so far proven ineffective – they have risen by 3.5 percent in the last six months. The ruling coalition, however, say the results of their efforts will take time to show.

The government launched a website to compare supermarket prices earlier this year, and gave institutions more powers to act. For example, the Competition Council can now compare contracts between retailers and suppliers.

According to Skirmantas Malinauskas, an adviser to the prime minister, retailers would cut prices during to oust competition, but once the competition was out, the prices went up again.

“We hear echoes from retailers that the situation has changed. Maybe it’s because the supermarket chains think that the risk [of manipulating prices] is too big and the abuse [of the market position] has decreased,” Malinauskas told LRT TV. “[The measures] paid off, because we have started speaking about transparency” in pricing.

According to the government, people's wages are growing faster than the prices.

“We shouldn’t have illusions that suddenly one or another decision will change the price dynamics, the free market or competition,” said Tomas Tomilinas, an MP from the ruling Farmers and Greens Union's political group in the Lithuanian parliament, Seimas. “We need to show clearly that the government pays attention to defending the interests of the worst-off.”

However, retailers claim government actions cannot lead to lower prices. “Global factors are at play,” said Rūta Vainienė, head of Lithuania’s Retailers Association.

“The demand element is important – we see rising wages, including the minimum wage, which leads to higher purchasing power.”

The minimum monthly wage in Lithuania is set to rise 9.4 percent from €555 to €607 before tax, starting next year.

However, Albertas Gapšys from the Agrarian Economy Institute said that consumers had a part to play: “If a consumer doesn’t buy a product and considers it too expensive, of course the price will decrease. If we have a need to satisfy, but there are no substitute products, then there may be a place for the government’s involvement to regulate VAT, or use other means.”

The government is also due to launch food coupon programme as of 2020 that should allow cheaper access to staple goods for families with small children. Retailers and experts from the banking sector, however, are critical.

Read more: Lithuanian government plans to launch food coupons next year

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