The President explains which areas should not suffer if Latvia has to tighten its budget belt

He summarized that there is still an extremely large imbalance in various sectors in Latvia.

On the other hand, as recommendations for more successful attraction of investments, Rinkēvičs mentioned promoting lending and reducing bureaucracy, stressing that the latter does not require large financial investments at all.

As reported, this year the government’s budget deficit will increase significantly and reach 2.9% of the gross domestic product (GDP), approaching the Maastricht limit of 3% of GDP, according to the draft Latvian Stability Program for 2024-2028 prepared by the Ministry of Finance (FM). which was approved by the government on Tuesday.

The FM informs that the year 2024 is characterized by the recovery of growth, a rapid decrease in inflation, the stabilization of energy resource prices, a stable labor market and, in general, indicates the resilience of the national economy against external economic shocks. Although the budget deficit of the general government is close to the 3% of GDP limit, most of it is made up of one-time expenses related to the internal and external security of the country.

At the same time, the structural deficit is close to the limit of 0.5% of the GDP, and therefore the national debt is sustainable, says the FM, noting that investments in the field of internal and external security are necessary – both to ensure the safety of the country’s citizens and to create the necessary conditions for economic development.

In the view of the FM, it should be expected that slower economic growth at the same time as lower inflation will reduce the tax revenues of the state budget. This, together with the need to allocate significant funding for defense and internal security, has created some tension in public finances, the ministry says.

As the Ministry’s current forecasts show that significant expenditure-reducing measures will not be necessary, it should be expected that additional expenses will be allocated in the next year’s state budget only if additional funding sources are found.