The best preparation for another recession or Plan B is the same Plan A, believes Ilmars Rimsevics, president of the Bank of Latvia, indicating that the government has to aim at a balanced budget and spending cuts, not increasing taxes next year.
«In Europe and elsewhere, investors, lenders and businessmen are focusing on the debt issue. If Latvia takes care of this issue faster and more efficiently than other countries, it will be better off,» Rimsevics points to the news portal BNN.
The bank’s president positively views the present data, noting inflation stabilization and forecasting the inflation rates will keep declining by 2-3% next year. Namely, the inflation fell by 0.7 percentage points to 4.3% in June and July 2011 due to commodity price stabilization in global markets and a drop in several food product prices, Rimsevics says.
At the same time, he indicates that the performance would have been better if a number of taxes had not been raised, such as the excise tax on alcohol, petrol, tobacco, as well as taxes on the natural gas and medical goods supplies.
Rimsevics also admits that overall the Latvian government and the parliament has adopted a number of difficult and unpopular decisions, fostering rapid recovery from the crisis. In contrast, he mentions other European Union countries, like Greece and Portugal, that are still holding off on consolidation, thus not improving their economic situation.
«It is clear which path was better,» Rimsevics says.
This year’s GDP growth will rise well above 4%; however, the forecasts on 2012 are rather conservative, indicates the Bank of Latvia’s president. He emphasizes that global developments are making the government stick to the already-planned consolidation next year as well.
«Although in 2011 Latvia’s growth will be faster than planned, unfortunately, it does not apply to the following year. Slower growth trend has already emerged in the world over the past months, as evidenced by the producers’ pessimistic outlook on the expected growth,» Rimsevics says.
As regards the upcoming elections, Rimsevics advises Latvia’s residents to keep track of politicians’ promises, as well as how these promises will be funded. Voters must decide whether they vote on Latvia’s future stability, prosperity, or on Latvia trying to earn the lacking money, the bank’s president notes. He himself has decided on whom to vote; however, he refrained from mentioning the party and the candidates’ names.