«The effect on households will be negative – inflation is currently the biggest challenge for the economy because prices are up for goods and services,» Citadele Bank economist Mārtiņš Āboliņš told BNN, commenting on gas tariff increase for households.
According to the economist’s estimates, the gas price rise alone will cost Latvia’s economy an additional EUR 800-900 million annually.
«In autumn high gas prices will be reflected in large heating tariffs. The state will partially compensate the price rise,
but prices will increase, and already inflation exceeds the wage growth rate.
This means residents’ actual purchasing power is starting to go down and not everyone has savings, which is why consumption may go down in other areas,» explains Āboliņš.
Citadele Bank’s survey among Latvian residents indicates that nearly every third residents is prepared to pay more for heating and electricity if it help become independent of Russia’s energy resources. Another 15% would be prepared to to it but lack the money to afford it.
Among the interviewed Latvian residents, 32% said they are prepared to pay more for heating and electricity if it means becoming independent from Russia. Most often such a response was given by men who live in Riga, Pieriga or Zemgale and whose monthly income ranges between EUR 751 and EUR 1 000.
15% of Latvian residents reveal that they would be prepared to pay more for energy resources but cannot afford it. This response was most popular among women aged 18 – 29 years.
39% of Latvian residents are not prepared to pay more for heating and electricity in a short-term perspective. Most often such a response is provided by residents of Riga and Latgale aged 60 to 74 years.
Among the residents who are not prepared to pay more, the majority live in Latgale, where such an opinion is shared by 53% of local respondents.
«It is clear everyone will have to pay more for heating in autumn – this much is confirmed by municipalities’ reported heating tariff changes. In some municipalities tariffs will more than double. In such situations a safety pillow is useful – it does help cover emergency costs for three to six months. If residents do not have a safety pillow, now is the time to create it by diverting a dozen euros every month. Those who own real estate should consider insulating their homes or purchasing solar panels. These will be major investments with tangible long-term benefits,» says Citadele Private Service Directorate manager Jānis Mūrnieks. «We can see some residents have already started preparing for autumn. The bank’s data indicates the interest for loans to purchase solar panels in the private segment has nearly tripled. The number of contracts signed for the provision of funding towards solar panels has quintupled.»
Analysis of responses from people with higher education shows that 38% are prepared to pay more for heating and electricity. Another 12% are prepared but cannot afford it. 35% said they are not prepared to pay more and 15% could not provide an answer.
«The influence of inflation is also present in survey results – due to the price rise residents’ purchasing power goes down. 15% of respondents said their desire to become independent of Russian energy resources may be strong enough to pay more for energy, but under the current financial situation they simply cannot afford to do it,» said Mūrnieks.
Read also: BNN ASKS | Gas prices may increase further for households in Latvia next year
BNN previously reported that JSC Latvijas Gāze plans to increase natural gas tariffs for households between 65.6% and 89.9% depending on consumption from 1 July onward.
For households that consume up to 250 m3 a year, the differentiated end tariff with VAT and excise tax will increase by 65.7% – from 1.10209 EUR/m3 to 1.8252 EUR/m3. For households that consume 250 to 500 m3 of gas a year, the end tariff will increase by 74.7% – from 0.96649 EUR/m3 to 1.6896 EUR/m3.
At the same time, for households that consume 500 to 25 000 m3 of gas annually, the end tariff will increase by 89.9% – from 0.80405 EUR/m3 to 1.52715 EUR/m3.
The state could compensate half of heating, electricity and gas tariff increase next year, according to the report from the Ministry of Welfare.
The ministry also has plans to present a new type of benefit – automatic reduction of electricity bills for low-income households in which a single person’s income does not exceed EUR 743 and the income of other members of the households is under EUR 520.
It is planned that this benefit will be provided based on information from state registers and state information systems on households and their income.
The planned period for provision of this benefit will be October 2023 – April 2024.
To support the least protected groups of residents and help them cover public utility and other costs during the next heating season, the Ministry of Welfare proposes improving housing benefit to make sure more people can qualify. It is also proposed to introduce a single-time benefit for disabled persons and seniors.