Latvian government gives up on fighting inflation

Yesterday, the Latvian government had a closed two-hour meeting on its ongoing plan. The decision? With the Latvian economy rapidly slowing down, the inflation will slow down naturally. Now, the main concern is that the slowdown may be too sharp and the government is considering boosting the economy by spending more and earlier in the year (as opposed to the traditional Latvian public sector end-of-the-year spending sprees).

So, the anti-inflation plan is about to be forgotten. The planned 1% GDP budget surplus for this year will probably be forgotten too, particularly if the slowing down economy leads to revenues falling short of forecasts.

Meanwhile, the Latvian business press reports that the number of vacancies in Latvian chain stores has decreased by a half, as people start taking up jobs that they would have passed on a few months ago. The job market is still quite tight, though, and I still occasionally overhear conversations about how hard it is to find new employees and how outrageous are the salary demands from people with no experience (and that happens in various sectors of economy, not just one).

UPDATE (Feb 8): EU is still urging austerity for Latvian government. In my opinion, they are a few months behind on what is happening in Latvia.