If Latvia cannot ensure the planned level of revenues and they turn out to be lower than expected, then the issue of expenditures will again be very seriously on the agenda, said in an interview with the LETA agency the chairman of the Fiscal Discipline Council (FDC), professor at the University of Latvia and dean of the Faculty of Economics and Social Sciences Janis Priede, LETA reports.
"Yes, currently economic forecasts are quite moderate. I would like to see higher figures, but unfortunately, we live in troubling times. At some point, we calmed down a bit. After April of last year, when the so-called 'Trump tariff wars' began, there was still an opportunity to negotiate, and the second half of the year showed a bit more confidence that the economy could revive," said Priede.
He explained that Latvia is very dependent on global economic processes, as well as on the main drivers of the economy in Europe, for example, the German economy. Germany is an important export market and cooperation partner for Latvia. Latvia is also heavily dependent on how things are going in other countries in Europe.
Therefore, economic forecasts have still been very cautious, and optimism has not really manifested itself, Priede admitted. Now U.S. President Donald Trump has once again raised the issue of Greenland and talked about new tariffs.
"Let's see how everything develops. From a pragmatic point of view, Trump certainly has his approach to using tariffs and this strategy, but it creates additional uncertainty," noted Priede.
Commenting on whether economic growth and its forecasts are sufficient for the successful financing of the obligations that Latvia has now undertaken, Priede acknowledged that in this case, it is necessary to return to the ratio of expenditures to revenues. According to his forecast, it may be possible to finance the period until 2028, but then, in his opinion, it will be necessary to very seriously revisit the question of whether the Latvian economy is growing fast enough.
However, the situation can change very quickly, Priede added. He emphasized that it is not worth dramatizing, as in April of last year, when tariff issues began, everything also looked very bad. Market sentiment was extremely low, even record low, no one really knew what to do, everything was collapsing.
"But everything returned very quickly. The stock market, for example, the 'S&P 500', reached an all-time high. Of course, the market is currently in a peculiar situation — the prices of gold, silver, and others are also very high," said Priede.
According to him, this shows that the market continues to diversify risks and does not fully trust what is happening. Therefore, it cannot be claimed that the current tariff initiatives of Trump will necessarily lead to escalation and poor economic results. Although the International Monetary Fund has already expressed concerns that such escalation could lead to a slowdown in the global economy, affecting both America and Europe.
"It is very difficult to predict anything in the economy right now. Honestly, economists are having a very tough time at the moment," admitted Priede.
At the same time, the head of the Fiscal Discipline Council (FDC) is clear that the next Saeima and the next government may face certain challenges. However, at present, Priede does not see recklessness. In his opinion, the current government and the Ministry of Finance are quite conservative in their forecasts, as is the borrowing policy based on the principle of borrowing funds when objectively necessary.
"There is no excessive partying now that we would not be able to pay for later. This is an objective reality, and at the moment there is no excessive risk," said Priede.
In his opinion, the question is whether the next government will have to make decisions about cutting expenditures. Priede emphasized that the next government will have to find the best budget balance, as the exemption regarding additional defense spending is in effect until 2028.
"Therefore, it is clear that certain actions will be required — whether it is cutting expenditures, raising taxes, or something else. Of course, one should not forget about the revenue side. It is important how much our economy will grow. This is always a possibility. The question is to what extent various types of industrial policy can attract investments and provide our entrepreneurs with the opportunity to operate successfully in Latvia," said Priede.
