Fiscal Ccouncil endorses the Ministry of Finance macroeconomic projections 16 June 2016
According to Article 20 of the Fiscal Discipline Law (hereafter – FDL) medium-term macroeconomic forecasts, including forecasts of growth rate of the gross domestic product (hereafter – GDP), deflator forecasts of the GDP and forecasts of growth rate of the potential GDP shall be developed by the Ministry of Finance (hereafter – MoF). According to the Article 28, Part 2 of the FDL, the Fiscal Discipline Council (hereafter – Council) shall perform an independent assessment of potential GDP and nominal GDP calculation by the MoF.
According to Article 4, Part 4 of the Regulation (EU) Nr.473/2013 (21 May 2013) of the European Parliament and the Council on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area, annual state budget draft and medium term budget framework (hereafter – MTBF) draft shall be based on independent macroeconomic forecast that is prepared or endorsed by independent bodies.
According to the Memorandum of Understanding (hereafter – MoU), signed on 8 February 2016, the Council should assume the responsibility of the independent body and endorse the MoF macroeconomic forecasts twice a year – while preparing the Stability programme and the annual state budget and the MTBF.
Initial version of the macroeconomic forecast for drafting Latvia's MTBF for 2017-2019 (hereafter – horizon period) was provided to the Council by the MoF on 3 June 2016 incorporating changes to the macroeconomic framework used for the preparation of the Stability Programme 2016-2019. An update was received by the Council on 8 June, incorporating significant revisions to the 3 June forecast. The MoF's macroeconomic forecast was discussed at the Council meeting with the MoF on 8 June 2016.
With this letter the Council endorses the MoF macroeconomic projections, particularly real and nominal GDP growth, potential GDP growth and output gap, inflation and GDP deflator, for the horizon period, for the purpose of drafting MTBF 2017-2019. The Council provides an opinion on the macroeconomic forecast.
When preparing the interim report on the Latvia's MTBF 2017-2019, the Council will also prepare section on macroeconomic outlook and output gap. The opinion provided in the Annex will serve as a basis for this section nevertheless the Council reserves the right to update it with the latest information.
The Council expresses its gratitude for the smooth co-operation and data exchange with the MoF colleagues.
Fiscal Council opinion available here.