RIGA - Inflation continues to haunt Latvia, with Eurostat, the European statistics office, reporting that the country posted the highest level of inflation in March among the EU's 10 new member states.
According to Eurostat data, Latvian consumer prices in March grew 1 percent on a month-to-month basis, followed by Cyprus with 0.9 percent and Slovenia with an 0.6 percent rise in consumer prices. Estonia showed an 0.4 percent rise in prices for the month, while in Lithuania, which has the fastest growing economy among acceding states, monthly inflation amounted to 0.5 percent.
On an annual basis, the picture was slightly better though it still pointed to trouble. Latvia finished third among the 10 mainly East European countries with a 4.7 percent increase in the consumer price index from March 2003 to March 2004, while Slovenia topped the list with 7.9 percent and Hungary came in second with 6.6 percent. Baltic neighbors Estonia posted an 0.7 percent rise from March 2003 to March of this year, while booming Lithuania managed 0.9 percent deflation.
Ilmars Rimcevics, president of the Bank of Latvia, told reporters last week at a press conference that inflation was likely to exceed 4 percent. Earlier bank analysts had forecast a 3.8 percent - 4 percent rise in the consumer price index.
Rimcevics confirmed what many Latvian economists have been saying; namely, that pre-accession speculation by retailers and wholesalers was fueling part of the rise in consumer prices.
One economist at Rietumu Bank has even predicted that prices in Latvia will rise as much as 10 percent in 2004.
Rimcevics, by contrast, believes that prices will stabilize in the summer.
For Latvia, the high level of inflation complicates the country's goal to adopt the euro by 2007. Last year Latvia failed to meet this criterion, as inflation was 2.9 percent, or above the permitted rate of 2.7 percent.