Fiscal Discipline Council endorses Ministry of Finance’s macroeconomic forecast 19 February 2016
On 19 February 2016, the Fiscal Discipline Council (Council) endorsed the Ministry of Finance’s (MoF) macroeconomic projections that will be used as the basis for drafting Latvia’s Stability Programme 2016-2019. Early review and endorsement of the MoF’s macroeconomic projections by the Council has been agreed to support the effort in the Government in preparation of annual documents - the stability program and the medium-term budget framework.
"Latvia is currently experiencing downward revision of the forecasts compared to previous forecasts. The development prospects of Latvia's economy, similarly to the global economy, are characterised by uncertainty: while the euro exchange rate, interest rates and oil prices create favourable conditions for economic development, the effect of slow-down in the emerging economies hampers economic growth globally,” the Council member Martins Kazaks comments.
The Council endorsed the MoF’s forecast for real and nominal GDP growth, potential GDP growth and output gap, inflation and GDP deflator.
The Council in its report to the MoF points out at the factors that threaten Latvia’s economic development potential in the coming years. The Council’s member Morten Hansen marks two risks: “First, Latvia’s economic development potential will decrease in the next few years if no improvements are implemented with regard to the labour market, including education and healthcare), as well as other matters that impact economic environment. Second, the current developments in the labour market, such as low unemployment indicators for Latvia as a whole and in particular for Riga region, as well as the growth rate of wages exceeding that of labour productivity, suggests that the labor market is heating up, which in the medium term may cause the risk of overheating of the whole economy.”
This is the first experience for the Council and the MoF to cooperate for the endorsement of the macroeconomic forecast. The Council considers that the cooperation has been successful and is pleased with the results achieved.
Council opinion available here.