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Latvian economy will see turbulence in coming months, says budget watchdog

Latvia's economy will return to the turbulence zone in the coming months, according to the Fiscal Discipline Council (FDP) monitoring report published December 18.

The government's approved aid instruments in the COVID-19 crisis are adequate for today's situation, according to FDP. At the same time, government action to tackle the effects of the crisis should be more preventive and rapid.

According to the FDP, the economy will return to the turbulence zone in the coming months, which will be affected by economic and social tensions associated with COVID-19. The stabilization of economic indicators currently observed in Q3 and Q4 data, allow the Council to conclude that this year's economic indicators will remain higher than previously forecast.

However, the FDP highlights the need for very clear government signals to the public on support measures. The deterioration of economic sentiment is a reflection of the downturn in the first quarters of 2021.

The Council notes that there have been a number of positive signals in the economy in the third quarter of this year: a decline in unemployment, a return of capacity capacity on production companies to the starting figures and a recovery in export growth. 

Analyzing tax revenues, the FDP said that tax collection remains stable and the outbreak effect of the second COVID-19 cannot yet be felt. Based on the experience of the first outbreak, the biggest drop in tax revenue can be expected around February.



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