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Artur Eresko - Tallied up – shed tears

Artur Eresko - Tallied up – shed tears

″Fat″ years come back to Latvia. To be more accurate — to the government of Latvia. As the statisticians tallied up at the end of October — the general government budget deficit of

Latvia last year made up 1.5 percent.

Seemingly what’s wrong with the Latvian slop between income and expenditure sized one and a half percent, when in France and in the Ukraine the general government budget deficit exceeds 4 percent, in Russia it varies at the level of 3 percent, but in Portugal it made up last year 7.2 percent at all. But in the context of Latvia you should compare it with the previous years rather than look at the absolute figure. The dynamics comes out sad: if in 2012 Latvia worked off at deficit sized 0.8%, and in 2013 —0.9%, but the last year the deficit spiked up to 1.5 percent. Almost twice just over one year. As the days grow longer, the needs are higher and the possibilities are fewer.

A similar situation develops with the Latvian foreign debts, which over the year grew by 733 M€ (up to 9.63 B€). Indeed, in relative terms the Latvian debt (40.6% of GDP) can make the finance ministers of Greece (168% of GDP in the second quarter of 2015), of Italy (136% of GDP) and of Portugal (129% of GDP) jealous. However, there is a reason to make Latvian Minister of Finances Reirs jealous as well — in all of the above listed states the foreign debt reduces, while in Latvia it grows.

Where such squander comes from? The government of Latvia is understandable, which after several years of strict savings implied by the introduction of external management in the course of economic recession in 2008-2010, decided to somewhat loosen the tightened belts. Not that a conservative Latvian government in the morning of a new 2014 all at once woke up as social democratic. Simply at such rate of consolidation the ministers might have lost not only portfolio, but population as well. The tighter the nuts are screwed up the more Latvian residents escape the financial press abroad of Latvia. The specificity of Latvian social protest is manifested not in riots or revolutions, but in escape from economic problems into other geographic reality.

To hold ungrateful population they had to cut some slack — wages sensibly raised and taxes slightly scaled down. But the growth of foreign debt and deficit of the government budget came off instantly.

The new budget year faces to the same challenges: how to do so that the sheep (teachers, health professionals and other public-sector employees) would be whole and the wolves (state financial control) would be full. The task is nontrivial, bearing in mind that there are all reasons for considering that this year the economic situation would go yet down. The Bank of Latvia has already cut the forecast for growth of Latvian GDP next year from 3 to 2.7 percent. The Ministry of Finance meanwhile stubbornly refuses, hopes for the best — otherwise the budget will have to be sequestrated yet more

 

Along comes the government’s obligation to curb the government budget deficit from the present 1.5% to 1 % of GDP.... All in all, no one would begrudge the government.

Candidate of Economic and Legal Sciences Arthur Eresko (Артур Ересько).