Source AP ©

Inflation reaches 11.4 in Latvia

A statistic agency announced Monday that Latvia’s annual inflation reached a 10-year high of 11.4 percent in September thanks to higher prices for tobacco, alcohol and housing services.

Consumer prices in the Baltic state have risen for four straight months since May, when annual inflation was at 8.2 percent. Inflation from August to September was 1.9 percent - another 10-year high.

Analysts and government officials, including the head of the central bank, agree that more inflation is on the horizon after increases in energy and food prices that went into effect Oct. 1 kick in. One Cabinet minister has even forecast that inflation could peak at 14-15 percent by the start of 2008.

Latvia, which for several months has posted the highest inflation in the European Union, was recently surpassed by Bulgaria, where the consumer price index reached an annual 12 percent in August.

Latvia, a nation of 2.3 million, has been experiencing an economic boom in recent years. Last year's GDP growth of 11.9 percent was the highest in the EU, which it joined in 2004.

However, the stellar performance has had economic repercussions, including a large current account deficit, soaring wages and rampant inflation. Economists have warned that if the imbalances are not rectified the economy risks a "hard-landing," a scenario in which GDP growth could fall to below 2 percent.

The government passed an anti-inflation plan earlier this year that went into force in July.

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