Republic of Lithuania: Selected Issues

This Selected Issues paper examines inflation dynamics over the past five years for Lithuania. A decomposition of inflation into its components provides clues to its main causes. It shows that energy price increases and convergence to European Union (EU)-wide price levels have been important factors driving inflation, but domestic demand pressures—and wage growth, in particular—have also contributed to inflation. The types of possible efficiency gains are illustrated in the context of health care and social assistance. The paper also examines migration and its long-term fiscal implications.