Latvia must begin to lessen the budget deficit quite considerably in the near future - Kazaks

RIGA - Latvia must start reducing the budget deficit relatively significantly in the near future, the President of the Bank of Latvia Martins Kazaks told TV3 this morning.

He said that the country's fiscal discipline was very supportive during the crisis, with the government supporting both businesses and residents, which was much needed. However, currently, despite the different Covid-19 waves, when the economy slows down from time to time, there is still growth both in Latvia and in the world as a whole.

"This means that the amount of aid needs to be reduced. The budget deficit needs to be reduced quite significantly. If the government is currently supporting someone, for example, in the short term because of rising energy prices, then they are very targeted groups within society, not very broad support for everyone. This is no longer necessary," Kazaks stressed.

He said that the main focus now is on future economic growth - where to invest so that money could be made in the future.

"The level of public debt is not threatening for Latvia at the moment, ie it is close to 50 percent of the gross domestic product (GDP), but at the same time, of course, only because the level of debt was relatively low at the beginning of the crisis. Therefore, the task at this point is to look at how to grow the economy, not to create an excessive deficit, so that the amount of debt to the economy begins to shrink, and when the next crisis hits, the economy can be supported again," said the president of the Bank of Latvia.

At the same time, he noted that next year's state budget will still be relatively "generous", but then in the next few years the budget deficit will decrease and as the economy grows, the government debt to GDP will start to shrink.

"No one has become rich by being in debt. Yes, we can borrow if we really have a very clear plan on where to invest this money to help the economy grow faster in the future, but we do not need this at the moment. It would only reduce the ability to help the economy in the future," Kazaks said.