Godmanis doubts inflation

  • 2008-02-27
  • By TBT staff
RIGA - In what could be a veiled attempt to doctor Latvia's increasingly grim inflationary numbers, Prime Minister Ivars Godmanis has reportedly expressed doubt about how the statistics agency calculates consumer price data and suggested that the methodology be changed.
Citing an anonymous politician, the Leta news agency reported that Godmanis told coalition partners he intended to speak with the bureau about the methodology. The source particularly mentioned the prime minister's consternation as to why cigarettes are included in the index despite the fact that many people don't smoke.

In January prices for alcohol and tobacco jumped an astonishing 16.5 percent due to higher excise taxes. Alcohol and tobacco make up 7.1 percent of the basket of goods used to calculate inflation in Latvia.
Monthly inflation reached 2.8 percent in January, while the annual rate was 15.8, the eighth straight month that the indicator has risen. Economists agree that inflation will continue to grow in the next several months as energy prices increase.
Godmanis' stab at the statistics agency could be a legitimate complaint, but coming at a time when inflation is accelerating and every month the government has to endure the extremely unpleasant spectacle of new data, the criticism is likely to be seen as an attempt to jawbone the agency into adopting a methodology less damaging to the government.

The statistics bureau bases its data on 19,000 prices for 458 goods and services in some 2,300 sales points. It regularly amends its methodology to reflect changes in consumption patterns across the country.
Godmanis said on Feb. 21 that inflation should fall in late May and June after energy price hikes slated for April take effect. He told journalists that the government is currently working in two directions 's "making as few movements as possible that might stimulate" further price increases and tracking whether GDP is falling too rapidly.

In April the price for electricity for households will jump nearly 40 percent to 0.071 lat (0.10 euro) per kilowatt, Latvenergo announced Feb. 20. The company said that for over half of Latvia's residents the increase would boil down to no more than 1.69 lats on the monthly bill.
Latvenergo last changed its tariffs on Jan. 1, 2007, when the electricity price for households increased 6 percent and for businesses by 18 percent.
Weighing in on the inflationary situation, President Valdis Zatlers said, "Of course, I would like somebody with a magic wand to touch the map of our country and inflation disappears one day, but it will not happen. We have to be ready for the tough reality."
He added, "and the main thing, we should not lie 's the government should not lie and the president should not lie to the residents that some magic will take place this month or next month."

The president reiterated the various forecasts show that inflation will begin to slow in the second half of the year.