After several years of price stagnation, which periodically turned into deflation, Latvia has faced a noticeable price growth. Annual inflation rate in this year January has reached its highest level since March 2012, amounting to 2.9%.
The greatest impact on price changes was made by rising cost of food products and non-alcoholic beverages related to the transport of goods and services, alcohol and tobacco, communication services, as well as lowering prices of clothing and footwear.
In this year January, as compared to January 2016, food products and non-alcoholic beverages have become more expensive by 6.2%. Fresh vegetables, cheese, cottage cheese, fruit, sugar, butter, milk, sour cream, confectionery, kefir, yoghurt, pork, fish, sweets, chocolate, meat products also have risen in price. True, potatoes have become cheaper.
Tobacco products went up by 5.1% during a year, alcohol by 0.9%. Prices of clothing increased by 4.1% and of footwear by 3.4%. Services and goods related to transport became more expensive by 5.6%, which is associated with a rise in the price of fuel by 14.9%. The level of prices for telecommunications services - fixed and mobile telephony – have increased by 5.8%.
However, prices for air and automobile passenger transportations have decreased, access to the Internet has become cheaper. The prices for thermal energy and natural gas decreased during a year. But if we take into account the trends on world energy markets, then not much time is left to enjoy relatively cheap light and heat for the Latvians.
By all appearances, in February annual inflation in Latvia will still grow. However, it can be followed by a relative calmness and until the end of the year the rise in prices is likely to slow down slightly.
Throughout this year, the inflation will remain close to 3%.
Latvians will have to reconcile with slightly more noticeable growth in prices. For most consumers it will not be too difficult since the growth of wages in the country will speed up. Thus, for several years the population will live according to the principle – small incomes should be afraid of and not big expenses.
Real GDP will grow. Nominal GDP will grow even more noticeably since growth in real GDP growth and growth in prices will be added up. It is important since in this period the real burden of old debts is reduced.
Overheating of the economy, at least in central regions of the country, will become a real risk only after a few years. Even if a plan to curb inflation will appear and a serious discussion will be imitated, actual changes on braking of prices are not expected.