If the prices of energy resources do not decrease, the rise in prices of products and services will be inevitable, reports the Latvian Chamber of Commerce and Industry (LCCI), referring to the survey data of entrepreneurs.
The LCCI explains that in view of the rapidly rising energy prices, many entrepreneurs have turned to the LCCI, expressing concern about the possibilities to pay the received gas and electricity bills, as well as uncertainty about the possibilities of companies to continue operating at the current production capacity and quality. In order to find out how the increase in energy prices affects the operations of Latvian companies, and what the consequences could be if energy prices remain so high for a long time, the LCCI conducted a survey of members.
In the survey, 39% of entrepreneurs admitted that the increase in energy prices has a negative effect on the company’s financial situation, while 22% indicated a decrease in the company’s development opportunities.
The participants of the survey also note that the company’s international competitiveness, fulfillment of obligations to cooperation partners and economic activity to date have been endangered. With energy prices remaining so high for a long time, 45% of surveyed entrepreneurs indicate that they will have to increase the price of their products or services, while 21% will be forced to stop investing in the company’s development. Survey participants also point to an increase in debt, a reduction in the number of employees or wages, and a decrease in production.
As a possible government support, the surveyed entrepreneurs indicate a reduction in the short-term value added tax (VAT) rate for energy resources, direct support to merchants, price fixing or a ceiling on the sale price to final consumers, review and redirection of profits of state-owned companies, and increase support for renewable energy.
Commenting on the survey data, Jānis Lielpēteris, a member of the LCCI Board, points out that the rise in energy prices must find operational solutions as soon as possible, while not forgetting a balanced medium- and long-term policy to ensure energy price stability.
“The uncertainty currently facing entrepreneurs marks a worrying picture in the context of business growth, which is certainly an undesirable signal at a time when the economy needs to be able to recover from the long-standing restrictions on Covid-19,” said the LCCI board member.
The survey of LCCI members took place from January 14 to January 17, 2022, 140 members of LCCI of all branches and sizes took part in it.
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