The biggest resource challenges ahead / Article

Today 10:15

Authors:
Eva Opmane, Economist, Bank of Latvia

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However, some problems remain – despite growing uncertainty and rising production costs, the unemployment rate in Latvia remains slightly above seven per cent (7.3%), down from eight per cent in the first quarter of last year.

However, the pre-pandemic rate was lower; However, due to the rapid political changes in the region and the suspension of business with Russia, the unemployment rate in the first quarter shows that most companies are able to cope with the first steps of change.

Although there were companies at risk of not finding new markets or sources of resources, no significant declines in activity affecting employment and unemployment were observed. The pandemic has taught companies to build resources to guard against potential supply chain disruptions, ensuring that production does not fall dramatically during the initial adjustment period.

However, major challenges in the provision of resources remain. In addition, resource prices had risen before the Russian invasion of Ukraine and continue to rise, which has increased production costs and possibly reduced customers’ interest in a more expensive end product due to higher production costs for domestically sold goods. for one third on an annual basis. Production became more expensive and difficult; At present, however, this does not mean a significant increase in unemployment.

The beginning of the second quarter shows that the labor market situation remains favorable for workers, with strong demand for workers and a persistent decline in registered unemployment. However, in the second half of the year, we are likely to experience a slowdown in economic activity due to rising prices and costs; In addition, unemployment could rise slightly.

More detailed analysis and data from the Central Bank of Latvia are available on the website Macroeconomics.

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