The Bank of Latvia predicts that this year the country’s economy will grow, inflation will moderate and wages will increase. If in 2023 economic growth was 1.4%, growth of 2.5% is expected for the new year.
However, real life may not be so great. One risk is interest rates, which are expected to fall this year, thus reducing loan payments by Latvians. According to Līva Zorgenfreija, chief economist of the Latvian bank Swedbank, it will probably be difficult for the European Central Bank to find the right moment, when and how much to lower interest rates.
“If interest rates remain high for a long period, this can bring economies that are already in a difficult situation to their knees,” he assessed.
Wages are growing more than prices
According to experts, domestic consumption will support economic growth in the new year. According to Pēteris Strautiņš, economist at the Latvian Bank Luminor, positive signs can already be seen. “The price level in Latvia has not increased in a year, hopefully it will not increase even in the new year, on the contrary it will decrease. And wages are increasing,” he said.
“Growth is lower, but purchasing power improves significantly: wages increase more than prices,” he added. Wage growth is expected to be between 7 and 9%.
Economists also see the weakness of Latvia’s trading partners, such as Germany and Sweden, as a sore point. The situation in the Middle East is also worrying. “It affects us indirectly, through energy prices. The price of oil has increased. Supply chains have changed, bringing with it pressure on prices,” said SEB’s Dainis Gašpuitis.
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2024-01-02 11:28:00
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