Economists: Prices in Latvia will continue rising

Take note – story published 2 years ago

The impact of the war in Ukraine launched by Russia is increasingly felt in the European economy. Inflation leaders in Europe are Baltic states. Prices continue to grow and so far, there is nothing to suggest that it might stop, say economists addressed by Latvian Television May 24.

The product that became especially strategically important and demanded both during the pandemic and with the beginning of the war – buckwheat – has also become more expensive. Last year a kilogram of buckwheat cost an average of €2.65, but this year averaged €4.11, almost double.

Consumer prices in Latvia are climbing faster than in the rest of the eurozone. According to Eurostat, in April this year the average price increase in the euro area was 7.4%, while in Latvia – more than 13%. This is mainly due to the fact that the income levels of the population of the Baltic States are relatively lower than in other euro area countries.

Experts agree that the rise will not stop so soon.

Āboliņš forecast an increase in food prices by a further 20-25%. Moreover, global energy price fluctuations are not yet fully reflected in consumer prices in Latvia.

"In particular, this can be seen by energy prices, when there was state aid for rising energy prices, it undermined this rise in the inflation data. However, we will now see this rise again as state aid is declining," said Bank of Latvia economist Krista Kalnbērziņa.

Dainis Gašpuitis, economist at SEB Bank, thinks that the influence of Covid-19 should not be underestimated.

“We are likely to expect a new outbreak in the autumn as well. The question is how much it could reinforce this obstacle. But it is clear that, in terms of both food prices and energy prices, quite difficult months are ahead,” said the economist.

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