Pressure on the increase of costs in the next several years will be enormous, and there are worries about the government’s ability to withstand that, said Fiscal Discipline Council’s member Andzs Ubelis.
According to him, the government’s recently approved outlook on economic growth this year of 3.7% is realistic and satisfactory. Latvia’s economy is expected to grow and warm up in the next couple of years.
This way, Ubelis says pressure on increasing costs will be enormous in the next couple of years, and there are concerns about the government’s ability to withstand that. Making reserve and reducing external debt is especially important in years of economic growth, because the economy is cyclic – growth years are always followed up by crises, says FDC member.
He welcomed the government’s initiated tax reform. He did say he was concerned about the reform potentially creating a deficit for budget revenue. Losses may be higher than the government expects.
FDC offers its outlook on annual budget and medium-term budget fiscal indexes every year. Since February 2016, Finance Ministry’s developed macroeconomic outlooks, which are used for budget planning, have been regularly submitted to FDC for evaluation and approval. Outlooks are approved twice a year – when developing the stability program and when developing the medium-term budget plan.
Next year’s fiscal space may be around EUR 79 million. Fiscal space in 2019 is estimated at around EUR 30 million, said Finance Minister Dana Reizniece-Ozola.
Both the minister and Prime Minister Maris Kucinskis explain that this amount will be clarified next week. Meanwhile, intensive work is currently being performed to assess possible reserves. It was previously said that the fiscal space might be EUR 60 million next year.
The ruling coalition and government will continue discussions on the 2018 budget next week. (BNN/Business World Magazine)
