State budget revenue next year is projected at €9.178 billion, or €217 million more than in 2018, while budget expenditure is projected at €9.205 million - €96 million more than this year.
The budget plan stipulates that defense spending will amount to 2% of gross domestic product next year. Total financing for healthcare will be over €1 billion.
The draft 2019 budget also provides that funds will be allotted to increase salaries for healthcare personnel and solve the problem of overtime pay in healthcare. Additional funding of €10 million will be allocated to increases pensions in 2019.
Financing for renovation and maintenance of highways will be €236.1 million in 2019. The medium-term budget also states that increasing teachers' minimum salary will have a financial impact of €17 million next year.
Local governments will be able to borrow from the budget for implementing their investment projects, at record low interest rates. 19.6% of the state budget's tax revenue will go to local governments in 2019 and in the medium term, together with earmarked subsidies, which will ensure a substantial increase in municipalities' incomes in the medium term.
The draft budget also states that fiscal safety reserve will be 0.1% of GDP or €31 million. General government deficit will decrease to 0.7% of GDP, while national debt is projected at 38.5% of GDP, as compared to the euro area's average of 84.1%.
According to the Finance Ministry’s forecast, Latvia’s gross domestic product will grow by 4.2% this year, which would be by 0.2% more than planned at the beginning of this year. The ministry said that the economy has been growing faster than expected thanks to strong performance in the first half of 2018, achieved largely thanks to an increased inflow of investment and export growth.
In the following years, the Finance Ministry expects investment growth to become more moderate, with Latvia’s overall economic growth also likely to slow down, stabilizing at the annual rate of 3%.
Latvia’s average annual inflation is projected at 2.5% both for 2018 and 2019, down 0.3% from the previous forecast made at the beginning of this year.
The stronger-than-predicted economic growth will also make unemployment drop faster than previously thought. The average unemployment rate is now projected at 7.7% for 2018 and 7.4% for 2019, down 0.3% from the earlier prognosis. Accordingly, the number of employed people will also grow faster, rising by 1.2% this year and 0.1% in 2019.
The average rate of wage growth is forecast at 8.3% for 2018, which means that the average gross monthly wage will reach €1,003 this year. The wage growth forecast has also been upped by 0.3%.