As a result of rapidly increasing living expenses, the financial situation of nearly half (46%) of Latvian households has worsened this year. Income of every sixth (15%) household in Latvia has gone down significantly, according to results of a study by Swedbank Institute of Finances.
The study reveals that this is the most negative result of the financial situation since 2013, when Swedbank first started this study.
The study reveals that the financial situation has worsened the most for residents aged 45 to 63 years, respondents with mainly secondary education, as well as residents with low income and unemployed residents.
At the same time, it is important to keep in mind that there are approximately 52% of households in Latvia that do not consider their financial situation as negative. These residents admit their respective level of welfare has either improved or has not suffered any major changes. Compared with 2021 the number of such households in Latvia has gone down by seven percentage points.
As for the influence of various factors on budgets of households in Latvia, results of Swedbank’s Institute of Finances indicate that most of the known positions were in the negative this year. Residents believe the situation with finances has gotten worse – both in the context of various costs and income-wise, job stability and savings-wise.
Residents also report moderately positive changes in regards to legislative changes and their effect on income. This comes in the form of greater differentiated non-taxable minimum, higher state support for families, as well as better accessibility to state/local benefits.
Study results also indicate that food and housing cost rise have impacted Latvian residents the most financially.
These two cost categories have often been at the top because residents spend most of their family budget covering them. At the same time, the price growth in these categories has cut a much larger hole in budgets that it did the previous year. According to results of the study, this year budgets of families in Latvia were impacted the most by growing transport (69%), housing (81%) and food (84%) costs.
Residents also outline the effect of factors like increasing healthcare costs (49%), household savings (45%) and the ability to make ends meet at the end of the month (46%). Moderately negative changes are also reported in areas like workplace stability, general income changes and debts – 10% of respondents mentioned these factors have a negative effect on their family’s financial state.
Compared with the forecast from the end of 2021 for January 2022, Latvia’s residents are considerably more pessimistic.
In regards to their household’s financial situation in 2023, only 15% of residents expect their family’s welfare level to improve. 54% of residents expect it to worsen. Compared with 2021, residents are far more pessimistic. Looking at responses across different groups of residents, it can be concluded that as the age goes up, the percentage of optimistic residents goes down.
The study was carried out by Swedbank Institute of Finances together with SKDS in November 2022. A total of 1 005 Latvian residents aged 18 to 25 years were interviewed.