The authorities have begun discussing the budget portfolio for the new year, 2026. The fact that priority is given to defense in it, of course, did not surprise anyone and did not provoke protests. And who would dare?
But can the country expect anything more in the new year than just showing its eastern neighbor the "dragon's teeth" laid near the border and the wall of drones?
Grandpa Trump Will Be Pleased
As mentioned, defense spending is sacred these days. Along with it come issues of other security. No one will argue that this is currently the most relevant topic.
At the same time, the authorities are trying to cut spending in less important areas. However, as noted by observing experts, they do this hesitantly, as if embarrassed. A year before the elections to the Saeima, significantly cutting budgets for education or, say, healthcare is not the best strategy. But completely leaving them untouched is also not possible. Therefore, the government has chosen a middle path – the cuts are not very large and, as a result, ineffective for the goal that seems to have been set – to free up as much money as possible for the main priorities. As a result, there is an increase in the budget deficit and public debt without prospects for economic growth.
Thus, the organization of doctors claims that Latvian healthcare lacks at least 56 million euros for the next year. But no one is particularly listening to the doctors – as if to say, who is having it easy these days? Although, purely formally, next year, healthcare has been allocated an additional 28 million euros, which is, of course, a very weak injection, just to keep it on its feet amid the current price increases. In total, healthcare has been allocated 1.9 billion euros out of 16.1 billion in the revenue part of the state treasury. For comparison, 2.2 billion euros are planned for defense. This will amount to 4.9% of GDP. Grandpa Trump will be pleased.
How Much Do You Need for Birth Rates?
To show concern for the population, which, in fact, no one intends to help financially in the new year regarding its most pressing needs, a couple of benefits were decided to be showcased. For example, funding allocated to address demographic issues. This topic is currently being heated by both politicians and part of society, as requiring immediate resolution. Moreover, demographics have been declared the second priority of the state budget for 2026, which also smells of cheap populism – everyone understands that nothing can be improved.
To boost birth rates in the country, an additional 94.8 million euros have been decided upon. The amount looks rather modest, doesn’t it? With this money, at current rates, one could build 6.3 kilometers of the Ral Baltica railway (15 million per kilometer). Seriously? Will the Latvian people start to multiply for this money? It’s hard to believe.
Of these funds, 42 million euros will go to various benefits for families with children. Another 24.2 million will be allocated for children living outside families, i.e., for orphans. An additional 7.7 million euros will be allocated for parental benefits, and 10 million for improving maternal and child health. Another 10.9 million will be sent for healthcare services and the availability of medicines as part of improving demographics.
Specifically, these amounts will translate into the following. The birth allowance will be increased from 421 euros to 600 euros. The childcare allowance will rise from 171 to 298 euros. The circle of families entitled to various benefits will also be expanded.
The increase in these two aforementioned benefits looks somewhat decent. But, hand on heart – can such amounts inspire the population to achieve feats in increasing birth rates? Can two additional hundred euros per child improve demographics in the country?
Beautiful Gestures
What other bonuses has the state budget for 2026 prepared for the population? An increase in the minimum wage by 40 euros – from 740 to 780 euros. However, this is a double-edged sword. Low-paid workers will rejoice, but entrepreneurs will be saddened – this is an additional burden for them. The businessman will, of course, raise salaries, what else can he do, but he might also lay off one of his employees to cut costs. Joy will turn into sorrow.
The non-taxable minimum will also increase by 40 euros – from 510 euros to 550 euros. In addition, they promise to expand the circle of pensioners entitled to pension indexing. Up to 98% of old-age pension recipients will receive an increase next year.
With great fanfare, the reduction of the value-added tax from 21% to 12% on bread, milk, eggs, and fresh poultry meat was also presented. It sounds beautiful and loud, but again – how much will this measure allow the population to save on everyday expenses? So far, it looks more like a beautiful pre-election gesture.
But Where’s the Money?
The new state budget does not answer the most important question – how will the country earn money? Everyone knows how to spend, but how to generate income? Latvia has spent the last two years in economic stagnation, but the 2026 budget is not directed towards development either. Some effect should eventually come from investments in the military industry, but for obvious reasons, this is not the industry that can provide a strong boost.
So it is quite possible that the next year will bring stagnation, although experts seem to predict a resumption of economic growth. However, they also promised growth for this year, but it ultimately did not happen.
Brussels Will Help
It seems that the government is placing its main hopes on EU funds. In 2026, indeed, a financial rain is expected to pour down on Latvia from Brussels. This is encouraging; however, there may also be a hitch here. The EU does not give money just like that, for consumption – only for specific projects and co-financing, and there are often problems with this. In previous years, it has happened that the money was reserved, but it could not be accessed. Sometimes it’s the slow bureaucrats to blame, sometimes the weak businesses, or something else.
At the same time, the external debt is growing rapidly. The higher the debt, the more expensive its servicing, i.e., interest payments. The burden of debt is becoming heavier; how can we take off? Economists, however, believe that in the coming years, Latvia's debt will remain below the critical level of 60% of GDP. With such a figure, at least bankruptcy does not threaten the country. Thank you for that.
