In March in comparison with the same month of the last year the ultimate impact on the price average was exerted by the advance in prices for food and soft drinks, as well as for goods and services associated with transport, and, consequently, with the car fuel costs.
The reasons for the price surge are not hard to plumb: inflation is growing because economics accelerated its growth, fuel and food have appreciated, furthermore, income of unwealthy Latvian population is rising.
Provided that within a couple of years from now the Latvian economics grows at 3-5% a year, you can’t wish for deflation or at least moderate inflation. Rise in prices, as a rule, follows the economic expansion.
Inflation in Latvia in 2017 can be expected at ca. 3%, in 2018 — 2.2%. However, the rise in real net salary should beat the rise in prices: this year salaries will rise by 3.5%, next year - by 4.5-5%.
The global rising cost of oil and food can serve as yet another explanation of vigorous growth of inflation from zero in August last year to 3.4% in March this year. The global jumps are immediately reflected on Latvian price tags: over the last year the fuel prices at Latvian fuel stations grew by 18.2 percent, but food prices jumped by 5.4 percent.
What’s more comfort is that food for people and cars has stopped rising: during March the price tags at fuel stations shrank by 0.3%, but at supermarkets – by 0.4%. By all accounts, by the second half of the year, this influence would weaken and Latvian prices would draw up their racing.
Here, however, much depends on negotiability and ability to comply with commitments by the OPEC member countries and by other oil-producing states, Russia inclusive. In light of stepped- up pace of political contacts of two largest players in the global oil-producing sector – Saudi Arabia and the Russian Federation – one can forecast that Riyadh and Moscow will use best endeavours to keep current prices under more or less comfortable conditions—$ 50-55 per barrel.
The situation with oil is similar to the processes in food global markets. Here also stabilisation has been recorded after vigorous growth.
So, in March the mean value of the FAO Food Price Index (Food and Agriculture Organizations of the United Nations) made up 171 points, which is 20 points higher (by 13.4%) than the level of March of the last year. At the same time, if compared with February of this year, the index decreased by 5 points (by 2.8%).
