Record low inflation for Latvia

  • 2003-01-16

A low rise in the consumer price index in Latvia - 1.4 percent last year - should be seen as very positive for the national economy, said monetary officials.

"The result is pleasing and inspiring for Latvia's economy," said Helmuts Ancans, head of Bank of Latvia's monetary policy administration.

According to Ancans, one of the key factors accounting for low inflation was European Union prices. "Latvian prices have increasingly become synchronized with the EU's price level, and through imports prices have also fallen here."

The Latvian consumer price index in 2002 nudged up 1.4 percent, which is the lowest figure since the country regained independence. Prices for goods in Latvia gained 1.6 percent in 2002, while service costs rose 0.7 percent.

Over the past year the largest effect of consumer prices were: a rise in food prices by 0.7 percent, fuel prices up by 9.1 percent, car prices up by 12.6 percent, household maintenance up by 1.4 percent, medicines and health care services up by 3.8 percent.

Prices for alcohol and tobacco, clothing and catering services also rose in the past year.

On the other hand, prices for communication services dropped 7.1 percent, including a drop of 7.9 percent for mobile phone prices and 20.3 percent for the costs of mobile telecommunication services.

Furthermore, last year's low inflation was also due to a poor harvest in 2001 and the subsequent price growth. As a result, there was "no objective reason" for agriculture prices to grow again in 2002, explained the Bank of Latvia official.

Other factors contributing to low inflation were a virtual lack of price regulation (0.6 percent in 2002), almost flat fuel prices and serious reduction in cost of mobile communication services.