Budget, Financial Services, Latvia

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 11:49

Budget deficit in Latvia to reach 10% of GDP in 2009

Nina Kolyako, BC, Riga, 17.12.2009.Print version
Latvia's consolidated budget deficit in 2009 will be close to 10% of the gross domestic product (GDP), if calculated using a methodology agreed upon with the international lenders, the Finance Ministry's spokesman Aleksis Jarockis informed LETA.

On the other hand, if the deficit is calculated only taking in consideration money flows – the data that Latvian institutions consider – the budget deficit will stand at approximately 8% of the GDP.

 

Based on money flow calculations, over the first 11 months of the year Latvia's budget deficit was equal to 4.5% of the gross domestic product. However, by the end of the year LVL 25 million is yet to be allotted to hospitals, LVL 84 million for co-financing EU structural funds, LVL 49 million in subsidies to farmers, and another LVL 21 million will be have to distributed from emergency funds.

 

These expenditures will increase the budget deficit figure in December by another two percentage points.

 

Thus, the annual state budget deficit, based on calculations considering the money flows, will amount to 7% of the GDP, plus, there is a 1% deficit in the municipal budget; therefore, the aggregate budget deficit will reach approximately 8% of the GDP by the end of 2009.

 

Latvia's agreement with the international lenders stipulates that the budget deficit should be calculated based on the European Commission methodology ESA 95. It takes in consideration a broader range of criteria and therefore adds another two percentage points to the calculation of the budget deficit of Latvia.

 

Thus, eventually Latvia's budget deficit in 2010 will be close to 10% of the GDP, in line with Latvia's agreement with the international lenders.

 

Finance Ministry underlines that the smaller budget deficit Latvia could achieve, the better, because that would allow to make smaller budget cuts next year.






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