Analytics, Banks, Financial Services, Inflation, Latvia

SEB Banka macroeconomic expert Dainis Gaspuitis told that in August deflation returned in Latvia mostly because of drop of energy prices. As this trend will persist, deflation is possible also in the coming months.

Food products, most believably, will gradually rise in prices, but there are no visible risks for a steep price hike.

"This year inflation will be slightly above 0%, but next year it might exceed 2%," he noted.

Citadele economist Martins Abolins told LETA that there has been a slight deflation in August as consumer prices declined 0.2% y-o-y.

"Deflation is short term and most believably related with reduction of heating tariffs in Riga, but no steep price hike is expected in the nearest time, and low inflation is forecast until the end of the year," said Abolins, adding that consumer prices might rise about 0.5 % this year, while next year inflation could be close to 2%.

Luminor economist Peteris Strautins told LETA that the annual inflation in Latvia will not change much until a year has passed since the beginning of the pandemic and the event's base effect expires.

He said that usually the price drop in August is related with food product prices, and also this year prices dropped 1.2%, but it is a rather small reduction compared to other years.

As reported, the average level of consumer prices this past August decreased 0.5% from July, while y-o-y, the average level of consumer prices decreased by 0.2%, according to the Central Statistical Bureau's data. In August 2020 as compared to July, prices of goods decreased 0.9% and prices of services increased 0.4%. 

Compared to August 2019, prices of goods fell by 1%, while prices of services rose by 1.6%.