Analytics, Financial Services, Latvia

Year-on-year, the budget surplus has increased EUR 40.3 million, notes the ministry.

The increase was mostly thanks to a large amount of re-payments by the European Commission for projects implemented in Latvia that were co-funded by the European Union. At the same time, municipal budget surplus has decreased from EUR 91 in June 2013 to EUR 56.3 million at the end of last month.

Steady increase in tax revenue was a significant contributor to budget revenue growth, however, the pace of tax revenue growth has decreased due to several amendments to tax laws. The increase in tax revenue was mostly due to growing domestic consumption, which in turn was a result of higher wages in the national economy. The overall tax revenue is on schedule, and the tax revenue projection for this year is unlikely to be exceeded significantly, the Finance Ministry informs.

Tax revenue has increased EUR 107.4 million or 3.4% from the first half of 2013. The highest increases were observed in value added tax revenue (9.6% or EUR 77.1 million higher) and property tax revenue (10.8% or EUR 11.4 million).

Labor tax revenue was as per plan, whereas corporate tax revenue totaled 89.5% of the planned amount and was 2% or EUR 3.8 million less than in the first half of 2013.

Total budget spending increased 3.1% in the first six months this year, including a 6.4% (by EUR 54.2 million) increase in budget spending on development, 3.7% (EUR 28.2 million) on subsidies, and 14.9% (EUR 2.18 million) on payments into the EU budget.

Local governments' spending has also increased, which is the main reason for smaller surplus in the municipal budget. Riga budget surplus has decreased from EUR 33.1 million last June to EUR 4.3 million now.

The Finance Ministry also points out that, as is the case every year, budget spending pace will accelerate before the final quarter. The government budget deficit this year is projected at 1% of GDP.