Latvian inflation drops to 17.7 per cent in June

Business News

Jul 8, 2008, 11:17 GMT

Riga - Latvia's annual inflation rate dropped to 17.7 per cent in June, down from 17.9 per cent in May, for the first time since May 2007, the Central Statistical Bureau said Tuesday. High inflation, coupled with slower growth, is increasingly clouding the economic prospects for the small nation, once known as one of the 'Baltic Tigers' along with Estonia and Lithuania. Inflation had been rising for 12 consecutive months, driven by increased costs for food, housing, utilities as well as fuel, and economists have predicted a slowdown. 'Unfortunately, we can't talk about serious change in this tendency because the summer months' inflation traditionally is lower compared to the beginning or the end of the year,' said Andris Larins, Nordea Markets economist, in a released statement. The fastest growing economy among the 27 EU nations in recent years, Latvia posted below-expectation gross domestic product (GDP) growth in the first quarter of 2008. The economy grew by 3.3 per cent, down from 8 per cent a quarter earlier. Rising prices and tighter lending policies mean consumers are cautious how they spend their money. Slowing domestic demand, rapid wage growth and a cooling real estate market are forcing the government to cut its spending to maintain a budget surplus. Growth is expected to slow in most Eastern European countries from the Baltics to Bulgaria under the impact of tighter credit, central bank moves to fight surging inflation and the ripple effect of a weaker global economy.

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Latvian inflation drops to 17.7 per cent in June

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