RIGA, December 25. /NEWSBALTIC/. Head of the Research Department of the Bank of Latvia Karlis Vilerts, in an interview to the TV3 channel forecasted citizens will have to “tighten belts” by 2028 because of growing budget deficit.
“Latvia’s budget deficit is large. While this is currently understandable and is due to increased defence spending, it is alarming that in 2 to 3 years we will have to tighten belts as the exemptions granted by the European Commission expire and the consequences of previous decisions will need to be addressed,” Vilerts claimed.
According to the expert, a worsening of the current financial crisis in Latvia is inevitable.
“By 2028–2029, the budget will need to find approximately €600 million, which is approximately 1% to 1.2% of GDP. So, belt-tightening will be necessary in some form. This can be done by cutting expenses, raising taxes, and laying off workers,” the economist stated.
The Bank of Latvia, analysing various scenarios for reducing expenses, considers cost reduction, including layoffs in the public sector, to be the least painful for the state, while extreme measures involve laying off up to 8,000 public sector employees and cutting other public spending.
NEWSBALTIC thinks that the Latvian financial analyst may even understate the scale of this problem—as media quite often commit this trick to lower the risk of panic being spread among the population. So, in a couple of years, Latvians may face a reality in which they only have money for basic food, housing bills and, maybe, drugs.
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