Annual inflation in Latvia jumped to 9.5 per cent, the highest figure in the last 10 years, the Latvian Statistics Bureau announced Wednesday, according to dpa. Inflation was mainly driven by price rises in tobacco, heat energy, and services related to housing, and a drop in prices for clothing, the bureau said in a press release. Services related to maintenance of housing and heat energy became more expensive. Among food products, fruit had the greatest impact on the price increase. Prices of bread and cereal products, meat and meat products, and dairy products rose as well, the press release said. The news comes four months after the government announced a broad-based plan to curb the inflation by gently reining in its own spending and encouraging the public to save more and spend less, especially in the overheated property market. The plan met with a mixed reaction, with some observers saying that it was neither timely nor ambitious enough. Last year Latvia posted economic growth of 11.9 per cent, one of the highest figures ever seen in the EU. However, inflation has been above 6 per cent ever since Latvia joined the EU in 2004, leading to warnings of possible overheating. The nation's current-account deficit almost doubled over 2006 to a massive 21.3 per cent of GDP, fuelling fears that the country's economy is now running too fast for its own good. Earlier this year, two international rating agencies downgraded Latvia's outlook from "stable" to "negative," citing growing imbalances in the Baltic state's economy. The Standard & Poor's agency made its downgrade in February, while the Fitch agency followed suit last week.
