Budget, Financial Services, GDP, Latvia

The budget for next year was passed in the final reading by 59 votes of the coalition lawmakers to 36 opposition voted.

Saeima meeting and debates on the budget and related bills continued for about 20 hours. The meeting started at 9 a.m. on November 23.

As compared to the 2016 budget, revenues are expected to grow by EUR 664 mln and expenditures by EUR 680 mln next year.

Saeima supported lawmakers’ proposals on support to different infrastructure, sports and culture projects worth EUR 20 mln.

Prime Minister Maris Kucinskis said that the budget marks the wish to make the first step towards radical reforms. "This budget is not for loud metaphors, it is based on the abilities of the coalition partners and their strength to achieve compromises, the wish to make the first steps towards radical reforms in many areas. We are going where we have never been. Let’s make that first step together!" said Kucinskis.

Next year, healthcare funding will be raised. 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 expand its budget deficit by 0.1% of GDP 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 has committed to raising its defense spending to 2% of GDP in 2018 and 2019, according to its medium-term budget framework.

Funding for education will rise, the Finance Ministry said. 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.

Revenues to the budget will be increased by gradually raising excise tax on cigars, cigarillos, cigarettes and tobacco. Tax rate on nature resources, including drinking water, will also be raised.

Changes will refer to small businesses. The current microenterprise tax regime will be operational for another two years, and a new tax regime will be developed for companies with low annual turnovers.

Lawmakers also passed a bill that will tighten the requirements that make one eligible to the unemployment benefit.So far a jobless person in Latvia could claim the unemployment benefit, provided that state social insurance contributions for this particular employee had been made during at least nine months in the 12-month period immediately preceding the date the person was granted the status of the jobless. Under the legislative amendments adopted today and effective from 2017, the jobless will be able to claim the unemployment benefit only if state social insurance contributions for them had been made for 12 months in the 16-month period before losing the job.

Saeima also passed in the final reading a law on support for startups, meant to develop support programs for startups and foster the creation of startups in Latvia. The new law will stimulate the creation of new startups in Latvia, thereby fostering research and innovation. The goal is to have twenty new startups annually, creating 120 new jobs.