Working Life Barometer in the Baltic Countries 2002 (pdf) - mol.fi

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exchange rate ensures stable prices for imports and contributes to the overall
domestic price stability. Thanks to the strong trade relations with the EU
countries, and the fixed exchange rate, it is anticipated that the prices of
internationally traded goods in Latvia will grow at approximately the same
rate as in the EU countries. However, it has to be noted that the impact of price
changes of marketable goods upon the total inflation may change in the
nearest future, when the Latvian consumer prices adjust to the relative price
structure of the EU.
As to the changes in service prices, it has to be noted that lately their impact
on inflation has been much lower than several years ago when the growth of
service prices was the decisive factor determining inflation level. Currently
overall service prices are rather stable, mainly due to slower growth rates of
administratively regulated prices, and it can be expected that this tendency will
prevail until the end of the year. In 2003 it is expected that the role of service
prices in determining inflation will grow and that will be additionally
stimulated by increase of excise duties, as well as introduction of
differentiated VAT rates on certain services. According to the law “On Value-
Added Tax” VAT shall be charged on any supply of goods or services or
import of goods, as well as self-consumption. VAT rates are 18 % or 0 %.
New VAT rate will be enforced from 1 st January 2003. There will be 9% tax
rate for:
supply of medicine and medicine goods;
training and science literature, juvenile literature;
mass media;
supply of hot and cold water, sewerage, garbage disposal;
supply of special products for infants;
burial services.
Administratively regulated prices will increase in line with the changes in the
purchasing power of the population and no significant price increase can be
expected within this group.
In accordance with the macro-economic development scenario, considering all
the above mentioned, the medium term inflation level will not exceed 3%, and
gradual levelling of the Latvian and EU average and relative price levels can
be expected.