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However, the wave of inflation will then subside. There is no reason for global prices to continue to grow so fast for a long time, says Līva Zorgenfreija, Swedbank’s chief economist in Latvia.
In addition, prices will fall in some groups, for example, the market forecasts a significant decline in gas and electricity prices. Transportation costs will also fall.
“This means that global prices will turn from a significant driver of Latvia’s inflation into a suppressor of price rises. On the other hand, inflation will continue to be maintained both by the second-round effects of rising world prices, which reach the consumer late provides for Zorgenfreija.
Overall, Swedbank has raised its average annual inflation forecasts for 2021 and 2022 to 3.1% and 4.5%, respectively. “On the other hand, the transient nature of world prices means that we will reduce the inflation forecast to 2.4% in 2023,” the bank’s economist informs.
The purchasing power of the average worker will continue to grow even with such – increased – inflation forecasts.
“Wage growth has been strong this year (we expect overall growth of around 9% in 2021), especially in those sectors where wages are around average and lower. The situation of the economically active population will continue to improve in the coming years – unemployment will fall sharply and wage growth “The poorer, retirees and those who rely on state benefits are in a much more difficult situation. They need state support to” hibernate “this period of higher inflation,” she said.
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