The economy is weak this year / Essay

Kazaks said inflation has fallen significantly – it was 20% at the beginning of the year, but in August it was less than 6%. Forecasts show inflation to be below 2% by the end of the year.

„That’s good news. The second good thing – since the middle of the year, wage growth has been faster than inflation, so the purchasing power of residents is gradually recovering,” Kazaks said.

Overall, however, the year has been weak in the Eurozone and Latvia. „The beginning of next year will not be particularly strong, but in the second half of the year [the economy] Growing more strongly due to wage growth, gradually the big projects implemented in Latvia will pull the economy upwards. Throughout the year, the European economy will also start growing faster, which will benefit our exporters,” noted the head of LB.

Meanwhile, head of the Bank’s Monetary Policy Office, Ultis Rudkaste, told Latvian radio that alongside the good news about the rapid decline in inflation, an unpleasant factor has emerged – high oil prices on world markets. previously expected. As a result, fuel prices have increased, so the Bank of Latvia has slightly revised the inflation forecast, but it should still be below 2% by the end of the year.

Rutkaste also said the economy should recover next year as unemployment remains low, but residents’ real incomes are beginning to recover after a shock to inflation.

At the same time, the Kazakhs acknowledged that even if the labor market is strong and wages are rising, wage growth will be faster than production in the future, which will lead to competition problems and then the economy will not grow again.

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Therefore, the labor market situation needs to be improved and there are two options here: internal resources should be used to improve people’s skills and health conditions, and in some cases, labor imports should be considered.

„Construction projects, the way they are planned in Latvia, cannot be built with local resources,” Kazaks said.

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