On June 21, 2024, the European Commission provided Latvia with technical information – three initial guidance tables for the Fiscal Structural Plan.
In line with Article 9, paragraph 3 of Regulation (EU) 2024/1263[1], Tables 1 and 2 provide the minimum level of the structural primary balance ratio necessary to ensure that the headline deficit is maintained below 3% of GDP and that government debt is maintained below 60% of GDP, assuming that there are no additional policy measures beyond an adjustment period of 4 years (Table 1) or 7 years (Table 2). Achieving these minimum levels by the end of the adjustment period implies some fiscal adjustment. Tables 1 and 2 also indicate the impact, if any, of the deficit resilience safeguard described in Art. 8 of Regulation (EU) 2024/1263. Table 3 summarises the main initial conditions and underlying assumptions.
Table 1: Technical information for a plan without extension, Latvia
|
For a plan without extension (4 years) |
With the deficit resilience safeguard |
Without the deficit resilience safeguard |
|
Minimum level for the structural primary balance in 2028 (% of GDP) |
-0.1 |
-1.3 |
|
Difference with 2024 structural primary balance (pp. of GDP) |
1.2 |
0.1 |
Table 2: Technical information for a plan with extension, Latvia
|
For a plan with extension (7 years) |
With the deficit resilience safeguard |
Without the deficit resilience safeguard |
|
Minimum level for the structural primary balance in 2031 (% of GDP) |
0.2 |
-1.1 |
|
Difference with 2024 structural primary balance (pp. of GDP) |
1.5 |
0.3 |
Table 3: Main budgetary, macroeconomic and financial variables, Latvia
|
Budgetary variables: initial conditions |
2023 |
2024 |
|
Government budget balance (% of GDP) |
-2.2 |
-2.8 |
|
Government debt (% of GDP) |
43.6 |
44.5 |
|
Net expenditure growth (%) |
8.0 |
4.9 |
|
Structural primary balance (% of GDP) |
-1.3 |
-1.4 |
|
Main assumptions for a plan without extension (4 years) |
Assumption |
Period |
|
Change in the cost of ageing (pp. of GDP) |
-0.3 |
2028 - 2038 |
|
Stock-flow adjustment (% of GDP) |
0.1 |
2025 - 2038 average |
|
Real GDP growth (%) |
1.4 |
2025 - 2038 average |
|
Inflation (change in the GDP deflator, %) |
2.5 |
2025 - 2038 average |
|
Nominal implicit interest rate (%) |
3.3 |
2025 - 2038 average |
|
Main assumptions for a plan with extension (7 years) |
Assumption |
Period |
|
Change in the cost of ageing (pp. of GDP) |
-0.5 |
2031 - 2041 |
|
Stock-flow adjustment (% of GDP) |
0.1 |
2025 - 2041 average |
|
Real GDP growth (%) |
1.3 |
2025 - 2041 average |
|
Inflation (change in the GDP deflator, %) |
2.5 |
2025 - 2041 average |
|
Nominal implicit interest rate (%) |
3.4 |
2025 - 2041 average |
[1] https://eur-lex.europa.eu/legal-content/en/TXT/HTML/?uri=OJ:L_202401263