Latvian prices have almost caught up with Europe. Unlike salaries

Already started to slow down

Now, of course, the growth of prices in Latvia has slowed down to insignificant values. Thus, in May, according to the Central Statistical Bureau of Latvia, goods and services increased in price by 0.1% year-on-year, and according to Eurostat, there was no growth in prices in Latvia at all, inflation was recorded at zero. But at the beginning of last year, the growth of prices here reached a whopping 20%.

As a result, prices in Latvia have become close to Western European prices, although our country was not particularly cheap before. According to the latest Eurostat data for 2023, the price level in the Republic of Latvia was 87.1% of the European average (100%). In the EU, it is cheaper to live only in Lithuania (81.6%), Croatia (75.8%), Hungary (75.8%), Poland (66%), Romania (60.2%) and Bulgaria (59.7%). In Estonia, the price level reached 97.9% of the European average. The champion in prices in Europe is Denmark. In this country, the price level is 143.4% of the European average.

But here we are talking about the general price level, by the way, presented in terms of purchasing power parity. And if we take, for example, food and soft drinks, then we have already surpassed Europe – 106.8%. That is, our food is 6.8% more expensive than the EU average. In Lithuania, this figure is 101.3%, in Estonia – 109.3%.

Staggering growth

These are the nasty miracles that post-Covid inflation is doing, which the Latvian authorities are now blaming on the war in Ukraine, believing that people’s memories are short. But prices have been skyrocketing for much longer. Back in 2021, our food prices were 5.5% lower than the EU average. Yes, inflation in the European Union caused by the fight against Covid was also quite high, but ours turned out to be more serious. Largely due to the staggering rise in energy prices.

If we take the price level in the EU in 2020 as 100%, then in 2023 they reached 82.5% in Latvia. In the last pre-Covid year of 2019, the price level in the LR was 73.8% of the EU average in 2020. In 2014 – 68.8%. Such is the bad dynamics.

Bad fact

In addition, in Latvia, clothing (103.5%) and footwear (108.3%) are also more expensive than the European average. Whether our traders are particularly greedy, or the competition is insufficient, or something else, but the fact remains – getting dressed and getting shoes in Latvia has always been expensive compared to the rest of Europe.

In Lithuania, the situation is similar – 101.6% and 103.4% for clothes and shoes, respectively. In Estonia, as usual, everything is still more expensive – 117.9% and 117.7%, respectively.

Inadequate situation

Another thing that makes Latvia stand out is the cost of energy. It is disproportionately expensive. Disproportionate to the income of the population. According to Eurostat, in 2023, the cost of energy in the Republic of Latvia was 103.1% of the EU average. It was more expensive only in 8 EU countries, and all of these countries are significantly richer than Latvia. These are Cyprus (120%), Italy (116.7), Germany (123.7%), Austria (116%), Belgium (115.8%), the Netherlands (150.8%), Ireland (118.2%), Denmark (121.7%).

Just think about it, even in the richest Luxembourg, where there are no mineral resources at all, energy resources are cheaper than in Latvia – 92.4% of the EU average.

But it is especially offensive that in Lithuania and Estonia energy is also significantly cheaper than in Latvia – 92.5% and 82.4% respectively.

Both Lithuania and Estonia use the pillar of our energy security, the Inčukalns gas storage facility, to ensure low energy prices for their populations, while Latvians have to overpay to have light and heat in their homes. Isn’t this a strange situation, which has been going on for many years? Latvia has had unreasonably high energy prices for a long time now.

They sat on my neck

It seems that the Latvian authorities have allowed the energy giants-monopolists to sit on the neck of the population, since these companies, mostly state-owned, are payers of large sums to the state budget. Thus, the payment for electricity and gas in Latvia is a kind of state tax, which is levied on every resident of the country. And this tax is very considerable.

Moreover, there has been no movement on the part of the authorities towards liberalization of this approach. Only in the Covid years, when people were in a really tough situation because the authorities closed entire sectors of the economy, the government, out of its generosity, paid out paltry energy benefits to the population. These handouts have long been eliminated, but the sky-high prices for energy resources remain. Thank God, the situation has improved a little in recent months, but not thanks to the efforts of the government or monopolists, but thanks to lower prices on world markets.

In general, the situation resembles that which has developed in Latvia with medicines, for which the consumer also pays an inappropriate amount. Everyone understands everything, knows everything and is regularly outraged by this. But none of the authorities either wants or can do anything, although promises are made on this matter regularly.

Buy yourself a locker

What is slightly cheaper in Latvia than in Europe is furniture. The price level for it is 86.6% of the EU average. Great. You can buy yourself a cabinet and not fall into poverty.

But you have to be more careful with household appliances – 102.8% of the European level. Household goods – 93%.

“Among the EU countries, Malta is the most expensive country to buy furniture and interior items, as well as household goods, while France has the highest price level indices for household electronics. The lowest prices for these three groups of goods are recorded in Bulgaria, Poland and Italy,” Eurostat reports.

There’s work to do

The situation is as follows in other important positions. The cost of maintaining personal transport in Latvia is 93.9% of the average European average. We pay 71.9% of the average European level for transport services, which can be considered a good indicator. People from Western Europe, for example, are surprised at how cheap a taxi is in Riga. This is, however, due to cheap labor, and not due to cheap gasoline, which is ultimately not very good for the economy of the entire country.

Communication services in Latvia cost 92% of the EU average, and restaurants and hotels – 89.9%. That is, we have almost caught up. It remains to wait until Latvia reaches the European average in income. But for now we have a hitch in this matter. Well, what can I say about this? We will work on it.