The biggest resource delivery challenges are yet to come / Article
Ieva Opmane, Economist, Latvijas Banka
Nevertheless, some issues have remained the same – despite high uncertainty and rising production costs, the unemployment rate in Latvia hovers slightly above 7% (7.3%), down from the first quarter of last year when it was over 8%.
That being said, the pre-pandemic rate was lower; However, given the rapid political changes in the region and the suspension of business transactions with Russia, the first quarter unemployment rate suggests that most companies are able to manage the early stages of change.
Although there were companies where the risk of not finding new markets or new sources for the purchase of resources persisted, there were not observed sharp drops in activity that would affect employment and the unemployment. The pandemic has taught companies to build up resources to insure against potential supply chain disruptions, ensuring that production has not been significantly reduced during the initial adjustment period.
Nevertheless, the biggest challenges in resource provision are yet to come. In addition, resource prices have already surged before Russia’s invasion of Ukraine and continue to rise, which has the effect of increasing production costs and potentially decreasing customer interest in a product. more expensive, since the production costs of goods sold on the domestic market have even increased by a third from one year to the next. Production has become more expensive and difficult; however, at this stage, this is not translating into a significant growth in unemployment.
The start of the second quarter suggests that the labor market situation is still favorable to employed workers, that is to say that the demand for employees remains high and that the registered unemployment rate continues to fall. On the other hand, in the second half of the year, we will feel the slowdown in economic activity more due to the increase in prices and costs; in addition, the unemployment rate could accelerate.
More analysis and data from the Latvian central bank can be found at macroeconomics.lv.
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