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International Internet Magazine. Baltic States news & analytics Friday, 29.03.2024, 02:40

Fiscal discipline watchdog warns about necessity to cut Latvian budget expenditure

BC, Riga, 21.11.2018.Print version
With the current policy persisting, in the future there are budget consolidation risks and it will be necessary to cut budget expenditure, Fiscal Discipline Council head Janis Platais told LETA.

Revising the general government budgetary plan for 2019, the Fiscal Discipline Council concluded that in contrary to other Baltic states, the Latvian government has not been able to draft a budget without deficit that counters the economic cycle.


Latvia’s budgetary plan for next year has a deficit of 0.7% of the gross domestic product (GDP).


The other two Baltic states have budgets with a surplus – 0.4% for Lithuania and 0.5% for Estonia.


"While Latvia keeps speaking and dreaming about a balanced budget, Lithuania and Estonia are drafting a budget surplus. Such a situation is not acceptable, especially because Latvia’s economy is growing steeper than the economy of its neighbors," said Platais.


The European Commission said today that Latvia’s budgetary plan might slightly deviate from the medium-term budgetary objective. It means that Latvia is on a verge of a violation, and it is not possible to allocate more resources for new expenses in next year’s budget.


"Latvia so far has drafted the budget with the maximum expenditure level, without considering how to compensate reduction of tax rates. Measures to reduce shadow economy in the future might not compensate for all budget needs. With the current policy, in the future the budget consolidation risks increase which means that budget expenditure should be cut," said Platais.


The European Commission has approved Latvia's 2019 draft budgetary plan, pointing out that the plan is broadly compliant with the Stability and Growth Pact for 2019.


The Commission points out that Latvia in 2018 and 2019 will not deviate much from the medium-term budgetary objective, and the deviation may amount to 0.1% and 0.2% respectively.


At the same time, Latvia is asked to ensure that general government primary spending increase no more than 6 percent in 2018 and 4.6% in 2019.


According to the Commission, Latvia has achieved limited progress with implementation of the European Council's July 13 fiscal recommendations, and may be urged to accelerate its progress.


As reported, the government approved the 2019 draft budgetary plan on October 15 and submitted it to the Commission.


According to the plan, budget revenue in 2019 is projected at EUR 9.178 bn, or EUR 217 mln more than in 2018, while budget expenditures are planned at EUR 9.205 bn - EUR 96 mln more than in 2018.






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