OREANDA-NEWS. November 13, 2008. The annual inflation index in Latvia is continuing to decline, despite the price rise to heat energy and natural gas in October. With the new collection season, we still can observe price rise to clothing and footwear. Also separate food product prices continued to increase, reported the press-centre of Latvijas Krajbanka.

One of the main factors, restricting the price growth in October, was fuel price decline. The record high prices to oil quotation reached in July have diminished by almost 60%, which caused fuel price correction in Latvia. 

It is important to mark the last month tendency, when the price decline to several goods can be observed as a result of campaigns, for example, to food products and medicines in October. 

No doubt that rapid decline of consumption and economic activity will be the main factors furthering inflation decline in the country. The consumption decline forces businessmen to review the price policy actively, offering different campaigns or reducing the mark-up to offered services and goods.

Thus there will be no surprise if the next year we will observe deflation not only during summer months. The threats of the world’s economic recession mean also smaller demand to oil and raw materials, which eliminated another inflation promoting factor. Thus, the inflation level in the end of 2008 and 2009 could be 14% and 7,5% respectively. Besides, the biggest decline of the gross domestic product, the smaller inflation digit can be expected.

Although prices are growing slower, the October inflation - 13,8% - is high enough. The main driving forces – heat energy and gas tariff rise and price growth to several food products - are in the expenses basket of each Latvian resident. Thus, despite the decline of inflation pressure, the majority of residents are still feeling its impact.