Analytics, Economics, Financial Services, Inflation, Latvia

Speaking at a news conference on Wednesday, Kazaks said that the Fiscal Discipline Council sees a considerable risk of a price rise, mostly due to the situation in the labor market and steady growth of wages.

"If wages and consumer prices grew at a faster rate than the current estimates, it will signal a steeper decline in competitiveness and the need to lower the GDP growth estimate," the Fiscal Discipline Council said, commenting on the macroeconomic forecasts prepared by the Finance Ministry.

Kazaks pointed out that the Fiscal Discipline Council is not making own macroeconomic forecasts but only reviewing the forecasts produced by the Finance Ministry. While the Council suspects that the actual inflation in 2020-2021 might be higher than the Finance Ministry's estimate, it cannot give any accurate figure.

At the same time, one should start worrying only if inflation was higher than 2.5-3% beyond 2020, he said.

As reported, the Fiscal Discipline Council has in general approved the Finance Ministry's macroeconomic forecasts for 2018-2021 that the Latvian government will use to outline the 2019 budget in the consultations with the European Commission.

The Finance Ministry has estimated the Latvian economic growth at 4% this year and closer to 3% in the following years. The ministry expects inflation at 2.8% in 2018, at 2.4% in 2019 and at 2.1%, starting with 2020.

If the inflation rose at a faster rate than predicted, the Fiscal Discipline Council will ask the Finance Ministry to revise the GDP forecast.