Economics Minister: state should not interfere in food price policy

Although energy resources are becoming cheaper, the increase in food prices has not stopped in Latvia. Latvian Economics Minister Ilze Indriksone (National Alliance) does not support artificial market intervention, indicating that the buyer can contribute greatly to price reduction, Latvian Television reported on July 20.

Some countries in the European Union have already tried their own means in the fight against inflation, for example in Hungary, the government has set price celings for certain product groups since the end of 2021. Less radical methods, such as tax incentives, have also been adopted by some other countries.

The Latvian central bank (Bank of Latvia) economist Kārlis Vilerts said that “the state can intervene, of course, and make the bread cost 10 cents, but it is unlikely that there will be enough producers ready to make the bread and then sell it. Accordingly, direct price controls may result in shortages of goods early or late,” the economist at the Bank of Latvia said.

“The resident can vote with their wallet. If the goods I want to buy at my usual trader have become more expensive now, I have a pretty easy way to see how much the goods cost elsewhere and go with another trader. And there, competition mechanisms would also lead to a general decline in these prices,” Vilerts said.

The Latvian government has not yet held talks on some kind of control over food prices, said the Minister for Economics Ilze Indriksone.

The Minister does not personally support artificial market intervention, explaining that it is the buyer who can make a big contribution to price reduction.

"Our retailers or large retail networks, Maxima and Rimi, in this case in an oligopolistic status, are nevertheless aware of the fact that they do not improve their reputation and image with high profits. And perhaps these signs that people are discussing on social networks and choosing to visit other smaller shops are a positive signal in some ways,” the Minister said.

Minister of Agriculture Didzis Šmits has spoken about the possibility for the state to engage in food price policy, and on Thursday announced the possibility of setting up a special regulator for monitoring food prices in shops.

Meanwhile, the Competition Council is currently analyzing how the mark-up in certain product groups is shaping up. But, as the institution notes, the findings are expected only at the end of this year.

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