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Monday 25.09.2017 | Name days: Rauls, Rodrigo
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Council: delays with EU funds could negatively impact budget completion

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis week the Fiscal Discipline Council provided confirmation to Finance Ministry’s macroeconomic outlooks the government will use as the basis for the development of the next year’s budget, as BNN was told by the council.

In accordance with the signed cooperation memorandum, the council provides early approval of the ministry’s macroeconomic outlooks to support the government’s work with budget-related documents – stability programme for 2017-2020, next year’s budget and medium-term budget.

«In total, we view the ministry’s macroeconomic outlooks as realistic. Nevertheless, the council also mentions a major risk factor that could affect Latvia’s economic development and budget completion in 2017 and future years – construction industry is weakened because of low activity in 2016. This low activity was the result of delays with inflow of EU funds in the economy,» says head of the council’s work group Martins Kazaks.

He says that there is no certainty that delays will not continue this week as well. It is also unclear whether the industry will be able to commence project completion in appropriate volumes even when EU funds become available again. This risk may surface in 2018.

«Labour force from the construction sector has reoriented itself towards foreign markets. This is indicated by the rapidly growing exports of construction services in the past couple of quarters. If recession in the construction and investment sector stays for too long, it will be reflected in the overall economy and leave a negative impact on budget completion results,» explains the council’s GDP work group’s leader. «But, considering that most of Latvia’s export market demand seems stable and that the lasting deflation period is now over, we expect a more rapid growth of nominal GDP than we’ve seen up until now.»

The council has approved the ministry’s outlooks in relation to actual and nominal GDP growth, potential GDP growth, inflation and GDP deflator.

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