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Wednesday 20.06.2018 | Name days: Rasa, Rasma, Maira
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Bank of Latvia: average inflation of 2013 could be lower than last year

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Last year’s annual inflation was 2.3% – the reduction was mostly set by factors from the side of general supply. The influence of supply factors was largely limited by moderate salary and work productivity dynamics, notes Bank of Latvia economist Daina Paula.

The level of this year’s average inflation could be somewhat lower than it was in 2012 – partially because of basic factors and partially because of the expected growth of national economy, predicts the economist.

“The average growth of national economy and gradual increase of purchasing power could restore influence of demand on inflation. This would set a further equalization of the average price level in Latvia with that of the average EU level. Therefore, the inflation level will slightly exceed that of countries with higher level of income. However, there are currently no preconditions for a national economy slowing rapid inflation increase. It is mostly because of a balanced development of national economy,” – explains Paula.

As it is known, the December index of Latvia’s annual inflation was low (1.6%). From the point of view of growth, it was affected by the rise of prices on unprocessed food, as well as the rise in fuel prices in Latvia.

The effect of the holiday season made certain services slightly more expensive (catering and hotels), while generally service prices were stable. Service providers, unlike the trade industry, evaluated the rise in the mood of consumers rather carefully in December. Prices of non-food products reduced monthly inflation, including prices on footwear (with the beginning of seasonal sales), which dropped by 5.3% in December, the economist comments the latest data of the Central Statistical Bureau of Latvia.

“Meanwhile, the supply factor’s pressure on inflation in Latvia remains the same: the overall stable global oil and food prices do not provoke an increase in domestic prices. Latvijas Gāze‘s December published projection for January and February provides for a small reduction on the tariff on natural gas for all consumer groups. This will also benefit expense dynamics of heating service providers and other industries,” – says Paula.

The bank’s expert adds that seasonal goods sales will become more active in January, which will positively affect the price level of non-food products. Also, post-holiday sales become more popular in January, given that traders usually bring more goods than they can sell during the holiday sales.

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