Inflation in Latvia

A short history of inflation in Latvia

Leaving the Rouble (1991 to 1993)

Latvia left the Soviet rouble in stages, issuing a transitional currency in 1992 and the lats in 1993, while inflation inherited from the collapsing union ran at several hundred per cent a year. Stabilisation was rapid once the new currency was in place and the central bank was made independent, and inflation was in single figures within three years.

Boom, Bust and the Euro (2005 to 2014)

A credit boom in the 2000s pushed inflation into double figures again and ended in one of the deepest recessions anywhere after 2008, with output falling by roughly a fifth. Latvia held its peg to the euro throughout and adjusted through wages and prices instead, producing several years of falling prices, and adopted the euro on 1 January 2014.

Post-Covid Inflation (2021 to 2023)

In Latvia, prices rose fastest in September 2022, at 22.0%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.