Price rise continues – inflation outlook for Latvia looks sad

Compared to February, consumer prices in Latvia may have increased 2.8-3% in March. This means that when compared to March 2021 inflation in the country may have reached 11-11.2% in Latvia in March 2022, according to bank analysts.
Swedbank economist Laura Orleāne predicted that in March 2022 consumer prices may have increased 3% when compared to February. Inflation, according to her, may reach 11.2% throughout the year.
«The strongest force behind the price rise was fuel, food and housing-related costs last month,» said Orleāne.
She said the average electricity price in NordPool exchange was nearly 60% higher in March than in February. The high price of natural gas maintains housing costs high in Latvia. However, this increase and role in inflation is kept in check by the government’s aid provided to households. Additionally, even though global oil prices show signs of fluctuations, their level remains high, which also pushes fuel prices up in Latvia.
Orleāne added that fuel prices grew by almost one-fifth in March and were 45% higher when compared to a year ago.
Swedbank economist also mentioned the food product price rise is more a reflection of recent events in Latvia and the rest of the world, including developments with energy prices and labour force costs, the pandemic and its consequences, poor harvests and increased global consumption.
Orleāne reminded that in April Swedbank published the latest economic outlook, in which the bank expects average inflation in Latvia to reach 10% in 2022 and increase by another 3.5% in 2023.
SEB Bank’s macroeconomic expert Dainis Gašpuitis predicted that in March consumer prices will have increased 2.8% when compared to February, increasing inflation to 11%.
«Based on the first wave of data on inflation in Eurozone member states in March, which indicated a major surge, we can expect a similar surge in Latvia,» said Gašpuitis.
He noted that prices increased mainly for fuel and housing-related groups in March. Prices also increased for food and other groups.
«Inflation trends are becoming wider and stronger,» said Gašpuitis.
As previously reported, consumer prices in February increased 1.6% when compared to January. Annual inflation growth – in February compared to February 2021 – indicates consumer prices increased 8.7%. At the same time, the twelve month average consumer price level increased by 4.7% in February when compared to the previous twelve months.