Another year has come and gone, bringing with it a series of changes and challenges. It is now the third year in a row that our lives have been marked by upheaval rather than stability. Throughout 2020 and 2021, the world battled a pandemic, and 24 February 2022 brought more tragic news – Russia launched an attack on Ukraine, sparking a bloody and senseless war. It has taken a heavy toll on the global economy, but no economic damage can compare to the lives lost and the suffering caused to people.

martins kazaks latvijas banka 2022 gada parskats

The war started by Russia directly affected global resource prices. Even before the outbreak of hostilities, inflation was on the rise due to the pandemic’s impact on supply chains and the recovery in demand. However, the war in Ukraine pushed inflation to unprecedented heights. The euro area saw its highest inflation levels in the history of the single currency.

Fighting inflation and preventing it from taking root became a primary concern for the world’s leading central banks, including the Eurosystem, of which Latvia is a member. Having sharply raised interest rates, we expect inflation to ease substantially this year and gradually return to the euro area’s medium-term inflation target of 2% over 2024. However, these necessary measures have caused the cost of money to rise, leading to higher payments for borrowers and an increase in the cost of servicing government debt. Borrowing has become more expensive, forcing governments that actively supported people and businesses during the pandemic to reassess their economic policies.

Alongside day-to-day work, 2022 was marked by a significant project and a crucial event for Latvijas Banka – the final preparations were completed to integrate the FCMC into Latvijas Banka. As of 2023, the project has come to fruition and we are now operating as a single institution with an even stronger team of professionals.

The main event of 2022, however, was Latvijas Banka’s 100th anniversary. This remarkable milestone was celebrated with a range of activities, including a scientific publication on the first 18 years of the central bank’s history, a coin art exhibition at the Latvian National Museum of Art, a travelling history exhibition in Latvian cities where Latvijas Banka had branches during the interwar period, and a world-class economic conference, among a slew of other activities.

As an institution, we face numerous challenges in 2023 – both domestically and internationally. One of our top priorities is facilitating the necessary impetus for Latvia’s economic growth. We plan to work on multiple fronts, including addressing weak lending practices, setting and implementing ambitious capital market development targets, as well as developing modern services and opportunities that will help the Latvian economy perform better.

This year, too, there will be obstacles to overcome and hurdles to face. But I am ready to forge ahead with optimism and determination, knowing that we at Latvijas Banka have the strength and expertise to navigate any challenges that may arise, thanks to an unshakeable foundation of skilled, ambitious, and motivated professionals.

We all have achieved so much. But we cannot stop there. I wish us all to continue growing and always be thinking about the next step!


mk paraksts

Mārtiņš Kazāks

Governor of Latvijas Banka
Riga, 5 April 2023