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Latvian government approves draft budget for 2022

On Tuesday, October 12, the government approved the draft state budget for 2022, which is scheduled to be submitted to the Saeima on Thursday at the traditional budget transfer ceremony.

The Saeima will then be able to start the decision process on next year's state budget.

In total, €696.8 million is earmarked for the priorities identified by the government in 2022. It is planned to allocate €385 million to various sectoral priorities, €270 million for one-off investments, €41 million for Covid-19. The reduction of the labor force tax burden is envisaged by raising the non-taxable minimum to €350 from 1 January and up to €500 from 1 July.

Incentives are planned for employer-paid medical services. If the employer pays the employee's health services, personal income tax and social contributions will not apply. 

Next year, the value-added tax (VAT) rate will be reduced from 12% to 5% for the printed press and books.

Latvia's gross domestic product (GDP) growth is expected to reach 3.7% in 2021 and 5% in 2022, respectively 0.7 percentage points and 0.5 percentage points higher than expected in February of this year. In 2023 and 2024, GDP will grow by 3.5% and 3.4%, respectively, 0.3 and 0.7 percentage points more than in February's forecasts.

For 2022, the government's base budget expenditure is estimated at €8,741.1 million. The main changes to the expenditure on the basis of the State basic budget for 2022 are the funding of €104.9 million for vaccination against Covid-19, €97.8 million for the financing of high-readiness projects, €90.9 million for family state benefits and €14.5 million for the equipping and strengthening of the border between Latvia and Belarus.

Prime Minister Krišjānis Kariņš (New Unity) has previously commented that the draft state budget for 2022 has three major lines – increasing Latvia's competitiveness, improving access to services, and improving quality, as well as strengthening national identity.

Health care, education, and security-related measures will receive the most substantial additional funding from the public budget, with a total of €220 million.

Wage growth is expected next year in the health, education, home affairs and cultural sectors.

LSM already reported on the main points envisaged in the 2022 budget.

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