Based on the data on GDP data for the first three quarters of 2012, Finance Ministry has actualized the assessment of macroeconomic development, increasing GDP growth assessment of 2012 to 5%.
The restored GDP projection provides for a constant 3.7% growth in 2013 and 4% growth in future years, reports the ministry.
“Keeping in mind the situation in other EU countries and external factors, Latvia’s economic growth in 2012 will be higher than previously anticipated. We expect higher tax revenue to the state budget, as well as a smaller general state budget deficit. We need to continue down this road and manage our state wisely, following fiscal discipline and popular economic trends,” – comments Finance Minister Andris Vilks.
Even though economic growth in 2012 is expected to be higher than it was predicted in June 2012, the largest risks are still linked to the external environment and the situation in Eurozone. According to projections is international institutions, it is expected that Eurozone’s economic growth will remain negative not only in 2012, but in 2013 as well.
Up until now Latvia’s economy has been very resistant against the worsening of the external environment. However, in relation to the increase in 2013, it is necessary to remain cautious. The economic drop in Eurozone in the last two years means a general reduction of growth rate for Latvia as well. This is why the Finance Ministry preserves the current outlook for GDP growth at 3.7%, explains the ministry.
Actualized calculations are based on previously set fiscal goals. Fiscal policy following will continue in 2014-2016. The base of this policy will be the following of the anti-cyclic fiscal policy principle. It states that the realized fiscal policy that works against the trends of the economic cycle, i.e., limitation at the growing phase of the economic cycle and stimulation at the reducing phase.
Tax projections for 2014-2016 are developed based on the tax completion of 2012, new macroeconomic indexes, as well as the amendments made to legislation.
Last year’s tax completion is considered to be successful. In accordance with operative data, tax revenue of 2012 was 4 288.8 million LVL, which exceeds the tax plan by 1.4% (60.6 million LVL).
With that, the 2013 general budget revenue is planned with a 3.3% increase, compared to 2012. Compared with last year, tax revenue of 2014 is planned with a 2.3% increase, 2015 – with 2.2% and 2016 – with a 3.5% increase. The largest changes, compared with the previous projection, are related to workforce tax and VAT revenue.
According to general budget revenue and expenses outlook, as well as corrections made using the European System of Accounts, the predicted general state budget deficit of 2012 forms 1.2% of GDP and structural deficit of 0.6% of GDP. It is expected that the general state budget deficit of 2013 will be 1.4% of GDP, -0.8% in 2014, and -0.3% in 2015.