RIGA — Consumer prices in Latvia have fallen 1.2 percent over the year to November, the country’s statistics agency announced Tuesday, confirming the government’s deflationary policy.

Latvian Statistics said that prices in November alone fell 0.7 percent compared to October, the eighth month straight that consumer prices have declined on a month-to-month basis.

Compared with November 2008, the prices for services have fallen only 0.2 percent, while those for goods have sunk 1.5 percent. The year-on-year fall in the consumer price index was the second so far this year, with the October result showing a 0.9 percent drop compared with Oct. 2008.

The deflationary trend is a targeted policy by both the government and the central bank to return competitiveness to Latvia’s economy, which during the boom years became wildly overheated.

The alternative route — devaluation of the local currency — was overwhelmingly rejected since, according to critics, a cheaper lat would have triggered higher inflation, an even greater number of defaults and bankruptcies, and quite possibly the collapse of the banking industry.

Still, many economists continue to criticize the government’s decision and argue that the previous government of Prime Minister Ivars Godmanis should have attempted to devalue the currency, a decision that rests solely with the Bank of Latvia, prior to seeking a bailout loan from international lenders.

According to Latvian Statistics the steepest drops in prices since last November occurred with housing costs (-8.4 percent) and clothing (-8.1 percent), while the most dramatic rise was with alcohol and tobacco (+19.8 percent) and health care (+16.2 percent). Alcohol and tobacco have become more expensive due to new taxes, while health care costs have risen due to government cutbacks on subsidies for many types of medicine and certain services.

Last month the Bank of Latvia forecast that deflation would amount to 3.8 percent next year as prices continue to fall on lower labor and other fixed costs. The bank said inflation would likely return in the second half of 2011.

Just a year ago in Nov. 2008, annual inflation amounted to 11.8 percent. The peak of Latvia’s runaway price hikes came in May 2008, when on a year-on-year basis prices had surged 17.9 percent.