Budget, Economics, Financial Services, GDP, Latvia

As compared to the 2016 budget, revenues are expected to grow by EUR 664 mln and expenditures by EUR 681 mln next year.

A revision of budget expenditures has provided additional 60 mln which will be spent on government initiatives and prioritized measures in various sectors. The government is determined to revise the budget on a regular basis also in the future.

Next year, healthcare funding will be raised by EUR 64%, according to the draft 2017 budget. The increase is being provided in the context of the planned healthcare system's reform. The extra funding has been secured by reaching an agreement with the European Commission, which has allowed Latvia to slightly expand its budget deficit and spend additional EUR 34.3 mln on the health sector.

Latvia's defense budget is set to grow by EUR 98 mln in 2017, to 1.7% of GDP. Latvia is determined to raise its defense spending to 2% of GDP in 2018 and 2019, according to its medium-term budget framework.

Funding for education will rise by EUR 11 mln next year, representatives of the Finance Ministry said, adding that EUR 47.2 mln would be provided for teachers' wage reform. The Education and Science Ministry has yet to revise its budget to provide EUR 15.7 mln of that amount.

Financing for social protection, including pensions and social benefits, will grow by EUR 197 mln next year, while budget expenditure on public order and security will increase by EUR 80 mln.

Additional EUR 19 mln have been earmarked in the draft 2017 budget for demographic measures. They include raising the monthly benefit for fourth and each successive child from EUR 34.14 to EUR 50.07.

The minimum monthly wage will go up to EUR 380 from EUR 370 in 2017.

As for next year's budget revenues, EUR 6.344 bln are expected to be collected in taxes, non-tax revenues are projected to reach EUR 513.9 mln, foreign financial assistance EUR 1.14 bln and other revenues are projected at EUR 94.2 mln.

The government intends to generate part of these revenues by clamping down on the shadow economy, with the new measures expected to provide EUR 16 mln in additional budget revenues.

In accordance with the medium term budget framework, Latvia's budget deficit is planned at 1.1% of GDP in 2017, at 1% of GDP in 2018 and 0.7% of GDP in 2019. Latvia is also planning a fiscal reserve, worth 0.1% of GDP, in 2017.

Latvia's economic growth is planned at 3.5% in 2017 and 3.4% in 2018 and 2019. Employment growth is projected at 0.2% in 2017.

Finance Minister Dana Reizniece-Ozola (Greens/Farmers) described the 2017 budget as a budget of kept promises. She said that its priorities included health and education reforms, public security and demography. It is important that we managed to provide part of the money necessary in these areas by carefully going through the existing budget expenses, as well as by launching a number of measures aimed at reducing the shadow economy, the minister said.

The Cabinet of Ministers is scheduled to decide on the adoption of Latvia's draft 2017 budget and the medium-term budget framework for 2017, 2018 and 2019 at an extraordinary meeting this Thursday, October 13. The government plans to submit both budget bills to Saeima on Friday, October 14.