General Government Budget Deficit in 2014 comprised 1.4% of GDP

21.04.2015

General government budget deficit at the end of 2014 comprised EUR 347 million or 1.4% of the Gross Domestic Product (GDP). The general government consolidated gross debt comprised EUR 9 633.2 million or 40.0 % of the GDP, according to the results of the April 2015 general government budget deficit and debt notification1 compiled by Central Statistical Bureau (CSB), which has been made in line with the methodology of European System of Accounts (ESA 2010). 

April 2015 general government budget deficit and debt notification: main indicators

 

2011

2012

2013

2014

 

Budget deficit (-) / Surplus (+), mln EUR

  General government

-678.3

-175.1

-172.1

-347.0

   Central government

-393.0

-79.2

5.2

-382.0

   Local governments

-103.4

-52.1

-100.2

-49.0

   Social security fund

-181.9

-43.8

-77.1

84.0

 

General government consolidated gross debt at nominal value at end of year, mln EUR

8 659.1

9 012.6

8 875.9

9 633.2

Gross domestic product at current prices, mln EUR

20 297.4

22 043.0

23 221.9

24 059.7

 

As % over GDP

General government budget deficit (-)

-3.3

-0.8

-0.7

-1.4

General government consolidated gross debt at nominal value at end of year

42.7

40.9

38.2

40.0

According to operating cash flow data of the Treasury in 2014 consolidated budget deficit was EUR 399.0 mln. But budget deficit calculated by the CSB, according to ESA 2010 methodology, is EUR 52.0 mln or 0.2% of GDP less.

Most significant adjustments with positive effect on the general government budget (reducing deficit):

  • adjustment for balancing foreign financial aid flow (data of institutions involved in administration of foreign funds) – EUR 139.0 mln or 0.6% of GDP;
  • adjustments in claims against debtors (data of the Treasury) - by EUR 36.3 mln or 0.2% of the GDP;
  • tax adjustment using time adjustment method (information source – calculation of the Ministry of Finance) – by EUR 26.0 mln or 0.1% of the GDP;
  • adjustments in accrued contributions in the European Union (EU) budget (data of the Ministry of Finance) – EUR 23.7 mln or 0.1% of GDP;
  • adjustments for exclusion of transactions of derived financial instruments (data of the Treasury) – by EUR 22.2 mln or 0.1% of the GDP;
  • adjustment of expenditure on construction of the Southern Bridge (data of Riga town council) – EUR 20.8 mln or 0.1% of GDP;
  • adjustments for revenues from auctioning of emission allowances granted to Latvia (data of the Treasury) – by EUR 7.3 mln or 0.03% of the GDP.

At the same time adjustment with negative effect to the general government budget was done, increasing deficit:

  • a single capital transfer for complying with the obligations towards the European Bank for Reconstruction and Development (EBRD) (data of the Privatisation Agency) – EUR 88.2 mln or 0.4% of GDP;
  • adjustments to obligations against creditors (data of the Treasury) - by EUR 51.2 mln or 0.2% of the GDP;
  • adjustments in the use of non-budgetary funds for construction of the Latvian National Library (data of the Treasury) – by EUR 28.6 mln or 0.1% of the GDP;
  • adjustment of government investment in financial institutions and enterprises (data of the Treasury) – by EUR 16.8 mln or 0.1% of the GDP;
  • adjustment of lump sum payments for pension schemes (data of the State Social Insurance Agency) – by EUR 15.1 mln or 0.1% of GDP;
  • balance of enterprises of central and local governments reclassified to general government (CSB data) – EUR 14.1 mln or 0.1% of the GDP;
  • adjustments to impact of exchange rate fluctuations (data of the Treasury) - by EUR 9.6 mln or 0.04% of the GDP.
General government budget deficit by subsectors in 2011 - 2014, % of GDP

Data source: Central Statistical Bureau of Latvia

In 2014 general government budget deficit, compared to 2013, rose by EUR 174.9 mln or 0.7% of GDP. Evaluating subsectors of general government, it must be concluded that central government budget deficit enlarged significantly. If in 2013 revenues and expenditure of the central government budget were balanced, in 2014 the situation has changed. In 2014 increase of deficit was promoted by a single capital transfer for central government to comply with the obligations towards the EBRD, as well as rise of expenditure for remuneration and social benefits. But reduction of budget deficit has formed in both other general government subsectors, especially in subsector of social security fund. Starting with 2014 central government finances pension subsidies in transfers, which are paid from social security fund. Reduction of budget deficit of subsectors of local governments was affected by rise in enlargement from personal income tax and practically unchanged level of expenditure.

In 2014, general government consolidated gross debt, compared to 2013, increased by EUR 757.3 mln or 3.1% of GDP, mainly, due to the emission of two euro obligations to refinance borrowings from the European Commission carried out within the framework of international borrowing programme.

In the calculations of notification of April 2015 data from the Ministry of Finance, the Treasury, State Social Insurance Agency, CSB, Riga Council and institutions involved in administration of foreign funds were used.

On April 21 the European Union Statistical Office Eurostat will release information on the results of the April 2015 notification in all EU member states.

 

More information on General Government Budget Deficit and Debt Notification can be found in the CSB database in section "Government Finances".

Accordingly requirements of the regulation (EC) No. 479/2009 general government budget deficit and debt notification is submitted to the European Commission twice a year – until April 1 and October 1. The results of the notification are used for assessing how the EU member states observe the compliance of the respective economic indicators with the criteria established by the Maastricht Treaty, that is, the ratio of the planned and actual general government budget deficit to the gross domestic product (GDP) at current prices must not exceed 3.0% and the ratio of the government debt to the gross domestic product at current prices must not be higher than 60.0%.

 

More information:
Government Finances Section
Vija Veidemane
Tel.: +371 67366963