Construction currently drives inflation, says Latvian fiscal watchdog

The main driver of price increases is energy costs, but construction is also currently the “focus of inflation”. Some state-funded construction projects should be suspended, Inna Šteinbuka, chair of the Fiscal Discipline Council (FDP) told Latvian Radio on January 31.

The main driver of price increases is energy, which Latvia can hardly influence, said Šteinbuka. At the same time, she pointed out that it was necessary to learn how to live in conditions where prices are rising. In this situation, the government needs to think about how to reduce inflation by its own forces.

“We cannot lower the prices of resources – gas or metal –. It doesn't depend on Latvia. But there are areas where something can be done,” Šteinbuka said.

Šteinbuka said it was worth looking at the construction sector, because it was a “focus of inflation.” In her opinion, the government should consider suspending projects financed by public money and returning to them when the situation is more favorable and prices do not grow so significantly.

The FDP had previously indicated that excessive increases in government deficits further stimulate inflation. In this situation, state aid is needed for the population, but it would not be right to share aid among everyone, said Šteinbuka.

“There is a part of the public that needs support. We have about a fifth of the population on the poverty line, at risk of poverty. That part of the population needs support,” Šteinbuka said.

 “There are energy-intensive companies that very much need support. And there are companies that can live, count on their income and not expect support from the state,” the head of the Fiscal Discipline Board said.

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