The Bank of Latvia has reported that the country is nearing a very high budget deficit level.
On February 23, participants of the meeting of the government and Crisis Management Council were presented with the situation with the state budget program for emergencies, as well as the country’s macro-economic situation in general.
According to outlooks from Finance Ministry, the general government budget deficit in 2021 will increased from the planned EUR 1.2 billion or 3.9% of GDP to about EUR 2.9 billion or 9.4% of GDP.
Commenting on information provided by Finance Ministry, Bank of Latvia council advisor Edvards Kusners said the expected state debt level of 50% of GDP was acceptable, but the expected budget deficit level for a time when the economy was on a rise was too high.
“More than every fourth euro spent by us is borrowed money. Latvia now has a record-high budget deficit – 9.6% of GDP. It is the same as during the economic crisis,” stressed Kusners.
The representative of the Bank of Latvia admits Covid-19 crisis is observed in developing sectors and sectors that have shut down. Form the central bank’s point of view it is not necessary to stimulate the economy any longer. Instead support should be provided to companies that have been impacted by the crisis and prepare for the moment when the economy can develop again.
“There is no point in stimulating idling sectors. We propose spending funds with a large long-term effect,” said Kusners. (BNN/Business World Magazine)