On Thursday, 8 May, the Saeima held a debate on the foundations of the country's fiscal and economic policy, based on two documents: the Progress Report on the Fiscal and Structural Plan 2025-2028 2025 prepared by the Ministry of Finance and the Report on Latvia's Economic Development prepared by the Ministry of Economy.
The debate started with a report by Finance Minister Arvils Ašeradens on the document that will become the basis for the next budgetary framework for 2026-2028. The Ministry of Finance launched the debate in 2023, establishing a tradition in the Saeima to discuss the state of public finances and budget priorities for the coming year, and this year for the second time the document prepared by the Ministry of Finance is being discussed at the same time as the report on Latvia's economic development, which was presented by the Minister of Economy.
"Today's discussion will mark an important framework, as we will debate solutions for Latvia's public finances in 2026, 2027 and 2028. These are the years when we will have to find answers to important questions - how to ensure economic growth, keep inflation at a moderate level, ensure sustainable government revenues and expenditures, and manage public debt successfully," said Finance Minister Arvils Ašeradens.
The 2025 Progress Report provides information on the implementation of the fiscal commitments made in the Fiscal-Structural Plan and progress in the implementation of its structural part, i.e. the measures, reforms and investments being implemented to meet the EU Council country-specific recommendations and EU shared priorities addressed to Latvia in the 2019-2024 period, as well as the macroeconomic and fiscal projections for the medium term. In addition, structural balance targets and fiscal space were identified based on projections under the current fiscal conditions, serving as a basis for decisions on possible priority areas for the national budget.
The Progress Report has been prepared in line with the macroeconomic projections for 2025-2029 developed by the Ministry of Finance in February 2025. The Progress Report includes three scenarios - a baseline forecast for 2025-2029, a pessimistic and an optimistic alternative.
"The biggest external risk at the moment is escalating trade tariffs. The US announcement of 20% tariffs on imports from the European Union could restrict growth in our trading partners and thus weaken demand for Latvian export. And this makes a pessimistic scenario more likely. In the light of these factors, the forecasts in this year's Progress Report should be seen as subject to much greater uncertainty than in the past. Fiscal policy must therefore be prudent and ready to adjust," warned Finance Minister Arvils Ašeradens.
In the process of drafting the draft law “On the State Budget for 2026 and the Budgetary Framework for 2026, 2027 and 2028”, the Cabinet of Ministers will consider updated forecasts of macroeconomic and fiscal indicators, updated budget balance targets and fiscal space calculations in August this year. The Minister of Finance points out that the autumn is already shaping up to be a challenging period for balancing expenditure and revenue, given the ambition to deliver public services, increase funding for defence, and pursue a counter-cyclical fiscal policy, while at the same time creating conditions for economic growth, which reinforces the need to start work on optimising public spending in good time.
