RIGA - A steep rise of energy prices and supply chain disruptions are causing high inflation in Latvia, the European Commission says in a new report.
The European Commission has released the European Semester Spring Package 2022, which includes country reports on the bloc's 27 member states, including Latvia. In following weeks, the reports and recommendations to each particular member state will be discussed in committees of the Council of the EU. The EU Economic and Financial Affairs Council (ECOFIN) is expected to adopt them in July this year.
According to report, the inflation rate in 2022 is expected to hit 9.4 percent on the steep rise of energy and food prices.
Although the rise in energy prices is likely to subside in the spring of 2023, price hikes in manufacture and construction are likely to cause a domino effect, fostering consumer price inflation in the forecast period.
Although Latvia's intention to stop importing Russian natural gas from 2023 will keep energy prices at high levels, the energy prices are likely to start dropping in the second half of 2023.
However, with prices expected to keep rising in other segments, the inflation rate in 2023 is projected at 3.5 percent, according to the report.