Baltics struggle with deflation

Dec 19, 2009
Oskars Magone

Prices in the Baltics continue to decline, a sure sign of the ongoing recession in the states.

RIGA - Recent statistics released by Eurostat -- the EU's official statistics agency -- have revealed that the Baltics are suffering some of the worst deflationary rates in the union. 

The statistics agency reported that Estonia and Latvia have the second and third highest levels of deflation in the EU, at 2.1 and 1.4 percent respectively. Ireland currently has the highest deflation rate at 2.8 percent.

"In November 2009, the lowest annual rates were observed in Ireland (-2.8%), Estonia (-2.1%) and Latvia (-1.4%)," the report said.

Lithuania and Latvia, meanwhile, are near the top of the inflation list over the 12 month average, with 4.8 percent and 4.2 percent, respectively. Romania topped this category at 5.7 percent.

Latvia's position on both lists reveals just how steep the change in inflationary rates has been in the country, which is reeling from the economic crisis.

Deflation is generally closesly linked with recessions and depressions. A high deflation can make it difficult to stabalize the economy through monetary policy, which becomes ineffective.

Annual inflation in the eurozone in November was 0.5 percent, up from -0.1 percent in October.

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