RIGA - The Latvian government plans to take its time in the decision-making process for next year's budget and will conduct discussions with other government ministers over developments in global economic markets, says Latvian Finance Minister Atis Slakteris.
Slakteris says that the later the budget is adopted, the more precise it will be, considering the changing global situation, and that the budget proposal might not make it to parliament by the Oct. 1 deadline.
"We are not running head over heels with next year's budget as future forecasts in the world's financial market by various international financial institutions are coming out differently," he said. "Budget amendments [this year] were adopted in such a hurryâ€¦ The aim, however, is to now do as good a job as possible," said Slakteris.
The 2009 budget under initial discussions is expected to provide for a surplus of 1.2 percent of GDP, leading to a 1.5 percent surplus in 2010.
In mid-July the Latvian parliament rushed through budget amendments to the 2008 budget, requiring the planned surplus to be reduced to 0.05 percent of GDP, or 8.0 million lats (11.38 million euros), as tax receipts collected by the government were less than expected due to the slowing economy.
Ministries and state institutions were ordered to reduce their average expenses by 5.91 percent to bring the budget in line. These cuts were mild in comparison to what is expected in the 2009 budget of Latvia, says Slakteris. He says that "The global situation has changed considerably and I believe that the Latvian public does not realize that [we] face a serious financial crisis. Experts are discussing the possibility of an economic crisis. This creates strong pressure on each state, including Latvia."
Slakteris cautiously added that "The GDP and tax revenue growth in Latvia was very steep in prior years and it is clear that it is not even going to be close to that in the near future, which is why there is no room for new promises. Actually, we have to review the old promises to figure out what to do with them."
The finance minister said that next year's budget was based on a GDP growth estimate of 2 percent, stressing that there are several development scenarios. The three-year budget framework that was developed earlier was based on higher growth estimates.
In a recent Hansabank Markets report, analysts forecasted a continuing slowdown in the local economy, with a global economic recovery expected to lift Latvia's GDP growth in 2009 to 1.3 percent and 4 percent in 2010. The budget still a long way from completion, Slakteris says that "no rapid action is planned for the budget discussions in August; but of course we will not put it off until the last moment. I agree that it has to be done timely, but it will not be easy."