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Finance Ministry upgrades Latvia’s GDP outlook to 3.2% for 2019

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Latvia’s Finance Ministry has upgraded the country’s GDP growth outlook for 2019 by 0.2 percentage points – to 3.2%, according to the ministry’s Latvia’s Stability Programme 2019-2020 project.

The ministry explains that Latvia’s Stability Programme is one of the elements of the annual state budget legislative draft and medium-term budget’s preparation cycle. With that, it covers macro-economic index outlooks for 2019, 2020 and 2022, fiscal outlooks and general government budget balance goals.

Considering the rapid growth of Latvia’s economy I 2018, GDP growth outlook for 2019 has been upgraded by 0.2 percentage points – to 3.2%. GDP growth outlook for 2020 is expected to be 3%.

According to estimates from Finance Ministry, the cyclic development of Latvia’s national economy reached its peak in 2018. In the coming years economic growth could be below last year’s, when GDP growth reached 4.8%.

According to the ministry’s estimates, the deficit of the government’s 2019 budget will be 0.5% of GDP. This is the same level previously estimated for the 2019 budget in initial stages of the budget’s development process. Medium-term budget’s general government budget deficit is not allowed to exceed 0.4% of GDP in 2020, 0.2% of GDP in 2021 and 0.3% of GDP in 2022.

Budget outlook at unchanged policy points towards higher budget deficit for 2020 and 2021 than allowed by fiscal discipline rules. The predicted deficit for 2022 is lower. At the time of development of the Stability Programme for 2020 and 2021 a negative fiscal space is outlined: -0.04% and -0.23% of GDP, whereas positive fiscal space is expected for 2022 – 0.48% of GDP, according to data from the ministry.

According to current forecasts, fiscal space for 2020 is -11.9 million euros. Fiscal space for 2021 is expected to be -81.1 million euros. Positive fiscal space in 2022 could reach 176.3 million euros.

‘Because in Latvia budget decisions are made in autumn instead of spring, the government has no need to make any specific decisions associated with the medium-term budget. In the second half of the week, when the government is set to tackle the state budget’s legislative draft, we will outline macroeconomic and budget outlooks, as well as clarify budget balance goals,’ the ministry explains.

All EU member states also submit that Stability or Convergence programmes to the European Commission every April. Based on this document the EC evaluates member states’ financial state and compliance with EU fiscal discipline requirements. EC is then able to develop recommendations for member states.


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