According to the methodology of the European System of Accounts (ESA), the general government deficit in 2024 was EUR 849.6 million or 2.1% of gross domestic product (GDP), the Ministry of Finance reported, referring to the data of the State Treasury on the implementation of the consolidated general budget in 2024.
The ministry reports that the budget deficit last year was 0.3 percentage points lower than in 2023 and 0.7 percentage points lower than projected last autumn.
A smaller than projected deficit was mainly determined by higher revenues expected in January of this year and attributable to 2024 under the ESA, and lower actual expenditure on both European Union (EU) fund projects and core state functions that were not spent at the planned amount, explains the Ministry of Finance.
In turn, the general government debt according to the operational assessment of the Treasury at the end of 2024 was EUR 19 billion or 47.7% of GDP, increasing by EUR 1.5 billion over the year. The Ministry of Finance explains that this was determined by the borrowing measures taken last year to ensure the overall need for financing, including the financing of the state budget deficit and the discharge of public debt obligations.
A lower general government deficit level in 2024 will reduce the expected increase in general government debt in the future, positively affecting government debt servicing expenditures, the ministry predicts.
The ministry notes that official data on the general government deficit and debt of 2024 will be available in April 2025, when the calculations on all transactions of the general government sector, including the performance of general government capital companies, will be completed, and the Central Statistical Bureau of Latvia will submit a notification of the general government deficit and debt to Eurostat.
According to the data of the State Treasury and the cash flow methodology, in 2024 the consolidated total budget deficit in the amount of EUR 733.1 million was by EUR 600 million less than in 2023. The Ministry of Finance points out that the improvement in the balance is observed at all levels of the budget.
A total of EUR 1.1 billion in deficit was created in 2024, but it was EUR 355.5 million less than a year earlier,
due to the traditional increase in spending in December in the state’s core budget. In the state special budget, 2024 was concluded with a surplus of EUR 337.1 million, which is EUR 85.7 million more than the year before. In turn, the municipal budget balance improved by EUR 107.6 million, reaching a deficit of EUR 48.3 million.
Consolidated total budget revenue last year increased by EUR 1.5 billion or 9.7% compared to 2023 and amounted to EUR 17.1 billion. The rise in revenues is explained by the received foreign financial assistance (EFA) revenues of EUR 1.8 billion, which was EUR 323.2 million or 21.9% more than in 2023. According to the methodology of the ESA, EFP revenues in the general government budget will be recognized at the level of EFP expenditure (excluding national co-financing), which last year was lower than the payments received.
In 2024, total budget tax revenue of EUR 13.6 billion, including a balance in the single tax account of EUR 25.9 million, but excluding contributions to the state-funded pension scheme of EUR 847 million, was less than a billion euros, or 7.8% more than in 2023.
The Ministry of Finance points out that after the fall in Covid-19 years and then the sharp rise in inflation and the rise in energy prices, tax revenues gradually return to the increase observed in the pre-pandemic period – on average 6-7% per year in current prices. Although economic growth is low for 2024, tax revenue growth exceeded it, mainly due to high labour tax increases and additional revenues from the banking sector.
A high growth rate in 2024 was observed in labour tax revenues, which was facilitated by positive dynamics in the wage fund throughout the year, according to the Ministry of Finance. Thus, the state social insurance contributions to the general budget, excluding contributions to the state-funded pension scheme, amounted to EUR 4.4 billion last year, and increased by EUR 374.9 million or 9.3% year-on-year.
In turn, personal income tax (PIT) revenue last year was EUR 2.8 billion – by EUR 310.3 million or 12.4% more than the year before. Including pit, revenue in the municipal budget in 2024 was 2.1 billion euros, which is EUR 232.5 million or 12.4% more than a year ago.
According to the data of the State Revenue Service (VID), average wages in total increased by 9.4% in the 11 months of 2024, including 8.2% in the private sector and 12.2% in the public sector. The Ministry of the Interior informs that at the beginning of 2024, there was a sharp increase in average wages in the public sector, which is largely related to the increase in wages in the education and defence sectors, as well as the January bonuses paid to the employees of the institutions of the Ministry of the Interior. However, in the last months of 2024, the rate of increase in average wages in the public sector slowed down and approached the growth in the private sector.
Value added tax (VAT) revenue in 2024 of 3.9 billion euros was at the level of the previous year, increasing by only 2.8 million euros or 0.1%. Ministry of Finance explains that due to the drastic reduction in energy prices, lower VAT revenues were paid by the energy supply industry. Likewise, the largest VAT payer – the trade sector – paid less than a year ago.
Total budget non-tax revenue of EUR 1.2 billion was collected in 2024 for EUR 156.4 million or 14.7% more than a year earlier. The Ministry of Finance points out that the increase in revenue was mainly driven by dividends paid by state capital companies to the state basic budget by EUR 34.1 million or 9.5% larger for 2023 profit, which in 2024 totals EUR 393.4 million.
Consolidated general budget expenditure in 2024 amounted to EUR 17.9 billion, which is by EUR 920.9 million or 5.4% more than in 2023.
Expenditures on compensation in the general budget was EUR 4 billion, and increased by EUR 482.4 million or 13.4% compared to 2023. Including expenses for compensation in the state basic budget (EUR 1.8 billion) increased by EUR 204.7 million or 12.7%, while expenses for compensation in the municipal budget (1.9 billion euros) increased by EUR 241.5 million or 14.5%.
In the state basic budget, the increase in the reimbursement of expenses is explained by the increase in the minimum wage in the country from EUR 620 to EUR 700 from the 1st of January, 2024, as well as by the increase in wages for employees in the defence, home affairs and justice sectors, including the payment of service allowances at the beginning of the year to officials of the interior affairs sector and justice department with special service ranks for every five years of continuous service. In turn, the increase in the municipal budget is associated with both the raising of the minimum wage in the country and the increase in the expenses for teachers’ salaries.
The total budget social payments and benefits last year were EUR 5.2 billion, which is EUR 377.8 million or 7.8% more than in 2023, including the state special budget expenditure on pensions and benefits was EUR 4.3 billion, increasing by EUR 322.7 million or 8.2% in 2024.
Increasing the average amount of pensions, by EUR 224.6 million or 8% of last year’s climbing expenses for old-age pensions, as well as by EUR 18.4 million or 7% increased expenses for disability pensions.
The Ministry of Finance notes that expenditure on sickness benefits in 2024 was also EUR 42.8 million or 12.9% higher than a year ago, while a year earlier there was a decrease in expenditure. Expenditure on unemployment benefits in 2024 was EUR 185.3 million, which is an increase of EUR 29.1 million or 18.7%, which was determined both by the increase in the number of beneficiaries, an average of 7.6% per month, with the increase slowing down at the end of the year, and by 10.1% more amount of granted benefit.
The total budget capital expenditures in 2024 reached EUR 1.5 billion – by EUR 92.5 million or 6.3% more than the year before. Expenditures of the state fixed budget for the formation of fixed capital (excluding transfers to municipalities) in the amount of EUR 1 billion grew by EUR 179.7 million or 21.3%, because in February 2024 a significant advance payment was made for the purchase of armaments, which, according to the methodology of the ESA, will be accounted for in the expenses at the time of supply of armaments. The ministry explains that without the aforementioned payment, the capital expenditure would remain close to the level of 2023.
In turn, in the municipal budget, expenditures on the formation of fixed capital in the amount of EUR 482.9 million in 2024 was 12.2% or EUR 66.9 million less than in 2023.
Expenditures on the Rail Baltica project co-financed by the Connecting Europe Facility was EUR 170.5 million in 2024, which is EUR 9.6 million or 5.9% more than in 2023.