The Finance Ministry has updated the medium-term general government budget balance under unchanged policies, taking into account the Treasury's data on the execution of the general government budget in the first half of 2023, while the projections for tax and non-tax revenue, as well as the medium-term baseline expenditure of the basic and special state budgets have been updated.
Latvia's gross domestic product (GDP) is projected to grow by 1 percent in 2023 and by 2.5 percent in 2024, while consumer prices will increase by 10 percent in 2023 and by 2.2 percent in 2024.
In the medium term, economic growth is projected to accelerate to 2.9 percent in 2025 and 2026, while consumer price inflation is expected to stabilize at 2.3-2.5 percent.
According to the Finance Ministry, the general government deficit will be 2.7 percent of GDP this year, 1.5 percentage points lower than budgeted and 1.3 percentage points lower than projected when the Stability Program for 2023-2026 was prepared.
Lower deficits with unchanged policies are also projected over the medium term - 2.2 percent of GDP in 2024, 1.3 percent of GDP in 2025 and a surplus of 0.1 percent of GDP in 2026.
Taking into account the defined fiscal conditions and the structural balance targets in line with the provisions of the Fiscal Discipline Law, the fiscal space available to finance the new priorities is EUR 148.4 million in 2024, EUR 450.3 million in 2025 and EUR 684.3 million in 2026. The fiscal policy strategy allows for the financing, outside fiscal space, of one-off internal and external security measures resulting from the war in Ukraine, support to Ukraine and its population in Latvia, as well as, if necessary, compensation for substantial increases in energy prices.