High inflation in Latvia is partly caused also by structural problems in economy - Kazaks

RIGA - The high inflation in Latvia is determined not only by external factors, but also by structural problems in the economy, said Bank of Latvia president Martins Kazaks in an interview with the Latvian public television today.

"It is not only the problem of the external shock, but also structural problems in Latvia's economy - lack of competition in certain sectors, the ability of companies to absorb the global price hike through productivity," said Kazaks.

He also said that another reason for high inflation is the fact that energy and food takes up a larger share in everyday goods and services basket of Latvian residents than in other countries.

He said that energy prices in Latvia have risen much steeper than in other EU member states and this is related with larger dependance on Russia, however, also prices from the world markets sooner reach consumer prices in Latvia than in other countries.

He said that companies in Latvia are smaller and they are not able to absorb the price hike.

Kazaks reminded that the Bank of Latvia at present does not expect a deep economic downfall - the economic slowdown is expected to be short.

"The first quarter of next year will still show a negative growth compared to the fourth quarter, the second quarter will balance out or show a slightly negative growth, but in the second half of next year the economy should start growing again," said Kazaks.