The deficit of Latvia’s state budget may reach 2.6% of GDP, said the chairperson of the Fiscal Discipline Council Inna Šteinbuka in an interview to TV3 programme 900 seconds.
She mentioned that the budget deficit in Latvia is not high. On top of that,
this year’s budget deficit was originally estimated to reach 4% of GDP.
However, considering the ongoing trends, budget deficit may be limited to 2.6% of GDP.
“The deficit is planned at more or less the same level for next year as well. This indicates Latvian policy-makers want a cautious and fiscally-responsible policy,” said Šteinbuka, whose organisation monitors the government’s financial decisions.
She also mentioned that because of the rapidly growing prices there has been a surge of tax revenue in Latvia.
This means the actual tax plan completion is higher originally planned. “This means we can hope next year’s tax revenue will be on a solid level and will allow the government to finance their defined priorities, which are security, health and education,” said Šteinbuka.
She also said
she is not particularly optimistic about the situation in Latvia’s economy in the first half-year of next year, because there are still problematic trends observed, such as the drop in purchasing power and exports.
“All this cannot just go back to the correct path immediately,” she added. At the same time, she mentioned the situation may improve in the second half of next year, because, considering that wages are currently growing more rapidly than prices, there is hope for restoration for purchasing power. Additionally, as global and Eurozone economies grow it is hoped demand for Latvian goods increases.
As previously reported, in September 2023 the Bank of Latvia estimated the budget deficit at 3.3% of GDP for 2023, 3% of GDP for 2024 and 1.7% of GDP for 2025.
Also read: Bank of Latvia upgrades inflation outlook for 2023 to 9%