RIGA, March 24 (Xinhua) -- The Bank of Latvia has revised upward its forecast of Latvia's GDP and inflation growth for 2017 as the latest estimates suggested that this year the Baltic country's economy will be growing faster than earlier expected, according to a report released by the central bank.
Latvia's inflation forecast for this year has been raised to 2.7 percent from 1.6 percent which the central bank projected in December 2016.
While at the end of last year, Latvia's GDP was expected to grow by 3 percent this year, now the forecast has been raised to 3.4 percent.
The central bank said on its analytical website macroeconomics.lv that the upward revision of the inflation forecast was based on global trends suggesting that climbing food and oil prices will be pushing Latvian consumer prices up more than previously thought.
Since January 2016 when the oil price hit the lowest point in 12 years, dropping to roughly 30 U.S. dollars per barrel, it has been gradually rising and reached 55 U.S. dollars per barrel around the year-end. This trend has already affected Latvian food prices and is expected to keep influencing the prices of other goods and services as well, the Bank of Latvia said.
At the same time, an increase in food prices in the world has caused food retailers to raise their prices also in Latvia's stores.
Meanwhile, the prices of non-regulated services have been edging up quite moderately.
The Bank of Latvia also predicted that the gas price might rise faster than expected due to the planned liberalization of the Latvian gas market this year.
Latvia's seasonally-adjusted GDP growth forecast has been upgraded to 3.4 percent from 3 percent as economic growth will be driven by rising private spending and exports, thanks to the continued growth of households' disposable income and improved external situation.
A faster inflow of investment, which is projected for the second half of the year, is also expected to fuel Latvia's economic growth, with increased public spending likely to contribute to this trend as well, the Bank of Latvia said.