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Latvian government agrees that state budget deficit must not exceed 1% GDP

BC, Riga, 11.11.2014.Print version
The government of Latvia decided yesterday that in structuring the 2015 state budget, the budget deficit must not exceed 1% of gross domestic product (GDP), reports LETA.

The Cabinet of Ministers reviewed a report on the macroeconomic indicators, income, and the general government budget balance forecasts for 2015-2017.

 

After a slowdown in Latvia's economic growth in the first quarter of 2014, the recent tensions between the European Union (EU) and Russia, as well as the sanctions that followed, Latvia's economic growth forecast for 2014 was reduced from 4% to 2.9%, for 2015 – from 4% to 2.8%. The Finance Ministry emphasizes that this growth is still higher than the average EU level.

 

Nevertheless, if Russia decides to introduce additional sanctions that will affect Latvia's national economy, or if the indirect impact of the current sanctions turns out to be more destructive than anticipated, Latvia's economic growth could slow down even more, the ministry indicates. The ministry points out that resumption of operations at Liepajas metalurgs will contribute to Latvia's GDP growth.

 

As for the fiscal policy, Latvia will continue to aim for sustainable economic growth and a responsible fiscal policy, observing fiscal discipline requirements, the Finance Ministry says.

 

If the budget deficit is higher than 1% of GDP, Latvia could face very negative consequences, the Finance Ministry stressed. This will mean violation of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, where the applicable fine is up to 0.1% of GDP.






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