RIGA - Latvia may need fewer budget cuts than previously estimated to meet its 2012 deficit target as the economy recovers from a two-year recession, Prime Minister Valdis Dombrovskis said, reports Bloomberg. “According to the latest updates, which have been confirmed by the central bank and Finance Ministry, the size of the consolidation will be between 100 million lats (142.8 million euros) and 110 million lats,” Dombrovskis said on July 6 in an interview with LNT.
The European Commission and International Monetary Fund, which extended to Latvia a 7.5 billion euro bailout loan package in 2008, had said the Baltic nation may need to trim as much as 180 million lats from next year’s budget to reduce the deficit to 2.5 percent of gross domestic product from 7.7 percent in 2010.
Latvia’s economy grew 3.5 percent from a year earlier in the first quarter, having exited recession in mid-2010.
In addition to spending cuts, the 2012 budget may include some small increases in the real-estate tax, Dombrovskis said. Latvia implemented spending reductions and tax increases equal to 16 percent of gross domestic product after its 2008 bailout.
Dombrovskis, who was re-elected in October, may face fresh elections in September if voters back a July 23 referendum to dissolve parliament. President Valdis Zatlers called the referendum in May after lawmakers failed to lift the immunity of a member targeted by an anti-corruption probe.