Slowly but surely, Latvia glides toward double-digit inflation

  • 2007-07-11
  • By TBT staff
RIGA - The Central Statistics Office on July 9 came out and announced what every Latvian already knows: that prices are inexorably continuing their upward trajectory and the likelihood of economic trouble 's i.e., a hard-landing 's is around the corner.
As of the end of June, annual inflation amounted to 8.9 percent, up from 8.2 percent a month ago, the statistics office said. Month-on-month inflation was 0.9 percent in June.
The result was higher than what was expected by analysts, who had predicted a slight rise of 0.2-0.3 percentage points, which supports the theory that in Latvia prices are now moving 's i.e., increasing 's according to their own logic. 

The announcement will also be a significant blow to the government, which adopted an anti-inflation plan in March that has yet to bear fruit. After a brief fall in the consumer price index earlier this year, prices in Latvia have climbed steadily and once again placed the Baltic state at the top of the European Union (Annual inflation in Hungary as of June is expected to reach 8.5 percent).
The data confirms the cycle of high price-high wage growth, as employers will be forced to continue boosting wages for their employees. Further rises in natural gas, transportation and water prices are expected over the next year as well.
The inflation data will also place the center-right government, sternly criticized in the international investment community, in an uncomfortable position when the EU's monetary commissioner, Joaquin Almunia, arrives in Riga for talks on July 12.

According to the statistics office, the jump in June consumer prices was due to higher prices for food, tobacco products and beer. Food products themselves were influenced by a 13 percent surge in fruit and a 6 percent rise in potato prices.
Over the past year, the prices of goods have climbed 7.5 percent, while those of services 12.4 percent.