Fiscal Discipline Council: More balanced support needed in Latvia

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Fiscal Discipline Council (FDP) said in a news release on June 5 that aid measures to mitigate the effects of COVID-19 crisis should be more selective, targeting sectors and companies still subject to restrictions.

The lowest point of the COVID-19 economic crisis could have been reached in April. 

In the fourth crisis monitoring report on the impact of COVID-19 on the national economy and the fiscal situation, the Council stated that the amount of tax collected was relatively positive, given the amount of tax holidays, and this does not specifically correlate with the pace of economic slowdown.

While unemployment continues to grow, the dynamics of free vacancies, wages and taxes collected show that recovery from the crisis may have begun.

The Council notes that State aid to companies must be proportionate to the problems caused by COVID-19 and must not distort the principles of fair competition. 

Although generally the government's measures to address the effect of the crisis are positive, the FDP calls on the government to take a more balanced approach to public investment and business support and to take into account the growing short- and medium-term fiscal risks.

The government's decision on the reallocation of EUR 500 million from the EU fund to mitigate the effects of COVID-19 is correct in the Council's view, as it does not increase public debt, but there must be confidence in the effectiveness of the redistributed funds.

The Council, like the government, considers that investment in productive infrastructure is important for economic recovery but agrees with the view of the Bank of Latvia that there might not be sufficient resources in the State budget.

The EU Recovery fund would therefore be an extremely important financial source for the Latvian economy. It is necessary to already develop clear criteria and principles for selecting the most successful projects in order to avoid a rushed and opaque distribution, the Council said.



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