The Ministry of Finance reports: according to data published by the State Treasury, in the first two months of 2023 the country’s state consolidated budget had a surplus of EUR 147.3 million, This is EUR 62.9 million less when compared to the same period of 2021.
The drop in budget surplus can be explained with higher expenditures related to energy support measures. In the first two months of 2023, the consolidated budget expenditures were at EUR 2.5 billion, which is EUR 308.9 million or 14.1% higher than a month prior. Revenue went up by EUR 246 million or 10.3% when compared with the first two months of 2022, reaching EUR 2.6 billion.
The rise in general budget revenue is mainly related to higher tax revenue,
which reached EUR 2 billion in January and February and was EUR 248.1 million or 13.7% more when compared with the first two months of 2022. There was a significant increase in revenue both from labour and consumer taxes.
With the growth trends of the previous year continuing in the wage and salary fund, high growth is observed for labour tax revenue. The rapid growth of VAT revenue is mainly related to taxes paid in the trade sector, which is largely due to the rapid increase of consumer prices. Average inflation in February reached 20.3%. High energy resource prices contributed to higher paid taxes in the electricity, gas supply and heating energy sectors.
A rapid increase of expenditures in the general budget is observed for grants and subsidies,
which reached EUR 662 million and was EUR 127.9 million or 24% higher when compared with January and February of 2022. This can be explained with higher than usual support measures used to reduce the energy price rise in the first two months, as well as increased expenditures on EU fund projects. It should be noted that there was also an increase of expenditures by EUR 44.5 million or 51.9% in the general budget, making expenditures reach EUR 130.2 million in the first two months. Additionally, the base budget expenditures for base capital formation (including transfers to municipalities) have increased by EUR 41.5 million.
In January, the state budget allocated EUR 20.7 million towards the construction of a new prison in Liepaja. Expenditures for the procurement of vehicles for the defence sector increased by EUR 7.1 million. The state budget also allocated EUR 18.5 million more towards various EU fund projects.
In total the first two months of 2023 concluded with a slight deficit of EUR 6.2 million, which is a significant improvement when compared with the same period of 2022, when deficit was at EUR 104.2 million.
Improvement of the base budget balance is related to reduced social payments
by more than a half – by EUR 104.5 million or 51.5%. Lower expenditures can be explained with significantly higher expenditure base in 2022, when single-time payments of EUR 50 were paid to families with children and benefits of EUR 20 were paid to seniors in order to compensate the negative effect from the growth of energy resource prices.
In the social budget, considering very high pension indexation, expenditures are 30.4% or EUR 115.7 million higher for old age pensions, as well as 33.4% or EUR 11.4 million higher for disability pensions. All of this caused the state special budget expenditures to rise by EUR 137.2 million or 24.2%.
With expenditures growing more rapidly than revenue, which increased by EUR 47.3 million or 7.1% in the first two months, there was a significant drop for the state special budget’s surplus when compared with January and February of 2022. In total, the state special budget’s surplus was EUR 8.9 million in two months, which is EUR 89.9 million less than a year prior.
In recent years there was a need in Latvia and other countries of the region to allocate additional funding towards prevention of consequences from Covid-19 pandemic. Since 2022 countries have had to allocate more money towards reduction of energy price growth and support of Ukrainian refugees.
It is expected that support measures in 2023 will worsen the general government budget balance by EUR 856 million or 2.0% of GDP. According to information from the ministry, in two months the state spend EUR 212 million on various support measures alone.
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