The government of Latvia has admitted that the economy of the country would grow at a lesser speed than planned earlier. The main risks for the nearest couple years – weak demand on the export markets and instability in the global economy.
The Ministry of Finance compiled ‘Latvian Programme of Stability for 2016-2019’, where the forecast of growth of Latvian economy for 2017 and 2018 is cut – by 0.3 and 0.2 percentage points accordingly.
Curiously, the office of Daina Reizniece – Ozola simultaneously with slowing down of the economy forecasts strengthening of growth of the global economy. In the Ministry of Finance they do not explain why economies of the world and of LR are moving diversely, but it is clear that Latvia experiences high dependency on Russia and, consequently, in a greater degree suffers from the EU – RF trade warfare.
Whatever the case, according to forecasts of the Ministry of Finance the Gross Domestic Product (GDP) of Latvia in 2017 and 2018 would grow by 3.3% and 3.4% accordingly. As a comparison: ‘Programme of Stability for 2015-2018’ forecasted the GDP growth in 2017 and 2018 in the amount of 3.6%.
You can postpone economy but never war. The government has chosen the priority growth area of the middle-term fiscal policy, where acceleration of militarization of the society is given the top priority:
— financing of the national defence in 2018 will be increased up to 2% of GDP. Within the State budget, increase in financing of defence, national security will be ensured first and foremost.
Further, in the priority list of the Cabinet of Maris Kucinskis follow:
— search of money for public health care and education (the solution has been already found – to increase deficit of the State budget, but to do that the permission of the European Commission is required).
— increase the minimum living wage and introduction of the principles of progressive taxation (grab from the rich, hand out to the poor).
— tightening of tax collection – the volume of taxes to GDP will be increased up 1/3 of GDP, mainly, owing to fighting shadow economy.
Because of fall in oil prices for the current year the forecast of average inflation is cut to 0.2% from the previous 0.8%, but next year the price advance can resume (if oil prices start regaining the fall), and inflation would make up 2.8% (previous forecast — 2.3%).
The proportion of jobseekers in Latvia would reduce from the previous year’s almost 10% to about 8%. But not because new jobs would start up in the country, but because the volume of free labour force would decrease due to demographic problems.
On the other hand those, who would stay on the job, can count on pay raise. Growth of nominal pay (before taxes) would make up about 6% in 2016 and 2017.