Latvian central bank president: economy will be fragile this year

Although Latvia's economy is quite resilient, the labor market is rather strong and unemployment rates are very low, overall the economy will be very fragile this year, the Latvian central bank (Bank of Latvia) President Mārtiņš Kazāks said in an interview on Latvian Television July 6.

He stressed the need for economic transformation in Latvia: "If not, [then] we are lagging [behind other countries]. Reforms are often mentioned but unfortunately are stuck, need to be implemented. "

Inflation in Latvia remains unacceptably high, Kazāks said. “There is, unfortunately, no easy and painless solution to reducing inflation,” Kazāks said, adding that inflation rates have started to fall and, unless unexpected events occur in the world, inflation will be in “single-digit figures” in the second half of this year and at the end of the year in “low single-digit figures.”

Consequently, in the second half of the year, wage increases will be more rapid than price rises and the population will gradually start to regain purchasing power.

“We see wages trying to catch up on price rises. Then there is the risk that prices are rising again from the rise in wages. Hence the risks of spiraling,” said Kazāks.

The President of the Bank of Latvia also encouraged the support of the less wealthy population, but said that support of the general public should be avoided. 

Kazāks expressed hope that the rise in interest rates will not continue next year, the inflation problem will be approximately resolved, then Latvia's economy will get a breather and growth will be close to 3% of gross domestic product.


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