BEARER OF INFLATED NEWS: Finance Minister Oskars Spurdzins predicted that Latvia's inflation won't decrease until the middle of 2008 when the new anti-inflation plan, adoted in May, will start to take effect.
RIGA - Latvia's annual inflation, now running at 11.4 percent, will probably start decreasing only in mid-2008, Latvian Finance Minister Oskars Spurdzins has said. "I suppose that, in comparing annual inflation figures, a decrease might appear in the middle of next year," the minister said. "We have to take into account the fact that we passed the first legislative amendments only this summer. They cannot start working immediately."
The minister pointed out that from its fiscal part, Latvia's anti-inflation plan, adopted in May, also contained important measures aimed at fostering competition and improving the balance of the labor market. It is also necessary to deal with administratively regulated prices, he added.
The government, during an extraordinary session on Oct. 8, endorsed the state budget for 2008, which provides for a 1 percent surplus of the GDP, designed to help combat inflation. The government plans for a 231.9 million euro surplus in next year's budget. Budget revenues are estimated at 7.84 billion euros, while government expenditures are projected to reach 7.61 billion euros.
The parliament submitted the bill for consideration in the committees, and the budget is scheduled to be considered by the government in a first reading on Oct. 31.
Dissatisfaction concerning the salary increases has already been expressed by several industry representatives, those who receive salaries from the state budget, including policemen, teachers, doctors and firefighters.
Former Latvian president Vaira Vike-Freiberga believes that next year's budget will be crucial for Latvia's future. The ex-president voiced her downbeat attitude to the current situation in the country and its "abnormally high inflation." "Inflation has climbed and climbed and climbed, and we have found ourselves in a deadlock," said the former head of the Latvian state.
"Moreover, it is getting hard for people to make ends meet and they will demand pay raises, so inflation will keep surging," predicted Vike-Freiberga.
"The government should have started to reduce the budget deficit a long time ago," she criticized, adding that the government not only should have drawn up a balanced budget but also should have planned a surplus, just like other European countries do.
Besides, in drawing up the budget, it is necessary to maintain a social dialogue among employers, trade unions and the government, and consultations with social partners have to be started timely.
Spurdzins said that the inflation reduction by mid 2008 will be facilitated by the surplus budget projected for 2008, and the slower salary rise. "These are the instruments aimed at achieving lower annual inflation," he said.
The minister added that workgroups are continuing their efforts to enhance Latvian exports, mentioning that experts' opinions are contradictory, for example, that on the issue of taxes some experts believe they should be raised, others want them to be reduced.
Spurdzins added that export taxation policy changes will not bear results in the short term, thus, everything should be evaluated carefully. He forecasts that inflation in 2007 will reach 8 - 9 percent, though did not rule out a two-digit increase.
