Dombrovskis: Latvian economy developing in «quite balanced» way

Latvia’s economy is likely to grow 2.8 percent this year and 3 percent next year, according to the European Commission’s report 2017 European Semester, released February 22.

The report says that Latvia’s unemployment level this year will be 9.5 percent and in 2018 it will shrink to 9 percent.

Former Latvian Prime Minister Valdis Dombrovskis, now the European Commission’s Vice President for the Euro and Social Dialogue, said that Latvia’s economic growth will be promoted by a rebound in investments, further increase of consumption and greater dynamics in Latvia’s main export markets.

"The economy is developing in quite a balanced way," said Dombrovskis.

At the same time, there is still high inequality of income in Latvia, therefore it is important to implement measures to reduce this inequality – by shifting taxes from low wages to other tax bases, targeting social expenses on less well-off social groups, continuing reforms in vocational education and work-based learning, and strengthening active labor force policy measures.

According to the European Commission, inflation in Latvia will be 1.9 percent this year and 2 percent in 2018. The national debt is forecast at 36.5 percent of the gross domestic product (GDP) this year and 35 percent of GDP next year.

The European Commission also noted that Latvia has advanced on a number of recommendations since 2012, but several issues remain open. The excessive government deficit was corrected in 2012 and fiscal discipline has been broadly observed since then. The fiscal framework has been set up and implemented. Latvia has made progress in higher education and judiciary reform and on integration with the EU energy market although full implementation is not yet achieved or will require an effort over several years.

The long-standing recommendations on work-based learning and insolvency have been completed in terms of regulatory framework, but effective implementation is still missing. Activation measures for unemployed have recently improved in quality, but supply is still low as compared to other Member States. Finally, growthfriendly tax shifting away from low wages, increasing adequacy of social assistance, healthcare and public sector reforms have not delivered satisfactory results.

All the European Semester reports can be downloaded HERE.

 

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Economy
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