The European Commission (EC) has assessed Eurozone member states’ budget plans for 2024. In Latvia’s case EC has concluded that the country’s budget plan “is not fully compliant” with EC recommendations.
Latvia’s budget expenditure growth is more rapid than the recommended, says Executive Vice-President of the EC Valdis Dombrovskis.
As reported by Dombrovskis’ advisor Maija Celmiņa, the Executive Vice-President mentioned that other countries have received similar conclusions from the EC – their budget plans do not fully meet provided recommendations. Dombrovskis stresses that Latvia – as well as other member states – has to pay more attention towards fiscal discipline.
“If we look at EC’s autumn economic outlook, we can see Latvia’s budget deficit this year and the next is planned at slightly above 3% of GDP. It is important to gradually reduce budget deficit in the coming years,” stressed Dombrovskis. At the same time, EC concludes that Latvia does not have a macroeconomic imbalance, and that there is no need for in-depth evaluation.
He explained that
a similar recommendation stands for the whole of Eurozone.
This means push towards tighter fiscal policy to make sure the fiscal and monetary policies are coordinated. Dombrovskis also said the European Central Bank employs a strict monetary policy in order to reduce inflation. This means it is equally important for the fiscal policy to assist with this.
Currently
additional fiscal stimulus would stimulate inflation, not the economy.
As previously reported, on the 16th of November the majority of Saeima deputies conceptually supported the legislative draft On the State Budget for 2024 and budget content for 2024, 2025 and 2026. The Saeima may commence the final reading on the 7th of December.
According to the budget plan, the state consolidated budget revenue for 2024 is planned at EUR 14.486 billion and expenditures are planned at EUR 16.212 billion.
The budget deficit in 2024 is planned at EUR 1.3 billion or 2.8% of Latvia’s GDP.
For 2025 budget deficit is planned at 2.3% of GDP and for 2025 – 0.9% of GDP. The state debt is expected to reach EUR 18.6 billion or 41% of GDP next year.
The three main budget priorities include domestic and external security, education and healthcare.
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