“The increase in inflation will be very unpleasant” – Latvia warned about rising prices 0 15

Just last month, consumer prices in our republic jumped by 1.9%, which is the highest increase since mid-2022. In turn, expert Gaitis Gashpuitis reassures that “this price increase will not be comparable to the inflation spikes of 2022-2023.” However, it will affect two crucial groups — energy and food.

“Even with the permission for passage through the Strait of Hormuz, the geopolitical risk premium for oil and gas prices will remain for a long time,” warns G. Gashpuitis, “Therefore, the inflationary stimulus has already been created, and it seems that we must already consider the impact of these events on heating energy prices for the upcoming heating season. Stress in the system could persist for a long time, especially if a peace agreement cannot be reached, which is a relatively possible scenario.”

Entrepreneur in the energy sector Davis Skulte believes that “the return of natural gas prices to pre-war levels is not expected this year.” “With the approach of the next heating season, prices are likely to gradually increase. There is no longer an excess in the market, while in Qatar — one of the largest suppliers of liquefied natural gas — there are significant supply disruptions.”

“Energy resources were the starting point,” adds K. Purgailis, “however, their rising costs have already resulted in higher production, logistics, and labor costs. Even if energy prices were to stabilize or even decrease, a complete and rapid return to pre-crisis price levels is unlikely.”

Still, D. Gashpuitis says that there is no need to dramatize the situation. Latvia's growth will continue, even if circumstances become a bit more complicated. This situation should be recognized as a need to strengthen the creation of energy capacities in Latvia and to implement energy efficiency measures.

“Overall, in the coming months, a more stable but fluctuating inflation is expected, with the risk that price pressure will persist longer than initially hoped, while economic growth — both in Latvia and globally — will become weaker,” summarizes K. Purgailis.