CRITICAL POINT: Ilmars Rimsevics says the 2012 budget must be adopted without delay to promote economic recovery.
RIGA - People must realize that, even though Latvia has recovered from the financial crisis, the economic crisis is not over yet, says Bank of Latvia President Ilmars Rimsevics in an interview with the daily Diena, reports Nozare.lv. “The economic crisis will continue until we are able to show that we are capable of managing financial and economic processes in our country.”
Rimsevics points out that there have not been any significant changes, even with the latest developments in politics, including President Valdis Zatlers’ proposal to dissolve Saeima.
“Politicians must be aware of what is happening in Latvia, the path the country is on, and the situation we faced that must never repeat. At the moment, Latvia is at a crossroads, and a well-timed, predictable adoption of the 2012 budget is of key importance. Last year, the government was formed quickly, and the budget was also adopted duly. If we cannot achieve the same this year, our previous achievements in state finances and economy may lose their value,” emphasized Rimsevics.
He believes that if the adoption of the 2012 budget is delayed, Latvia will not send any positive signal to foreign markets, investors will not create new jobs or the basis for new tax proceeds, and at the same time the country will not be able to fulfill its hopes and join the eurozone in 2014.
The central bank’s president emphasizes that even though food and oil prices on global markets have been growing rapidly, the increased taxes remain the main cause of inflation in Latvia. Therefore, the current prime minister, as well as the next one, must clearly state that there will be no additional tax hikes in Latvia.
“Another factor that influences inflation and causes concern is the growth of administratively regulated prices. The price mechanism must be transparent and understandable, so that Latvia would not face a similar situation like Lithuania once, when, due to the increase of administratively regulated prices, the country failed to meet the inflation criterion by 0.02 percent and was not invited to talks on accession to the eurozone,” said Rimsevics.
The central banker expects that if Latvia manages to balance its budget, the economic growth remains at four to five percent, and unemployment decreases below 10 percent, while inflation stands at two percent, then the country will proudly be able to consider the introduction of the euro.
“I have never emphasized that Latvia should need to introduce the euro at all costs,” said Rimsevics and stressed that Latvia must first focus on economic growth. If the country meets the criteria for introduction of the euro, it can “take a break” and consider whether this is necessary.
“The euro is not a magic wand; if it is introduced, the country will not become a dreamland and we will not become twice as rich,” pointed out Rimsevics.