Revenues are expected to grow by €664m and expenditures by €681m.
The GDP growth forecast for 2017 is 3.5% and 3.4% for 2018 and 2019.
Employment is expected to grow 0.2%.
The budget deficit is expected to be 1.1% of GDP in 2017, 1% in 2018 and 0.7% in 2019.
Latvia is also planning a fiscal reserve corresponding to 0.1% of GDP in 2017.
Inflation is forecast to be 1.7% next year.
Funding increase in prioritized areas
Healthcare funding will increase by €64m (8.5%), according to the draft budget.
Defense spending will grow €98m (27.7%) in 2017, to 1.7% of GDP. Latvia has committed to raising its defense spending to 2% of GDP by 2019.
Education funding should increase €11m (1.6%) next year, with €47.2m provided for teachers' wage reform.
Social security funding will grow €197m (7.4%) next year, while budget expenditure on public order and security will increase by €80m (16.2%).
Finance Minister: Next year's budget is keeping promises
"Next year's budget is a budget of keeping promises. Its priorities are reforms in health and education, as well as social security and demographic matters.
It's important that much of the funds necessary for these areas were found by carefully reviewing ongoing expenses as well as introducing measures for combating the shadow economy," said Latvia's Finance Minister Dana Reizniece-Ozola Wednesday.
The budget still has to be approved by the Saeima.
Following the decision, Prime Minister Maris Kucinskis released a statement saying: "The 2017 state budget is very closely linked to the government's declared priorities. The largest increases in funding are exactly in the areas identified as priorities - education, health care, as well as internal and external security."