Latvia’s fiscal watchdog on Thursday called on the government to rethink any new support measures aimed at mitigating the COVID-19 impact and consider gradually ending the existing support programs.
The Fiscal Discipline Council underlined that state aid should only continue in sectors directly affected by COVID-19 restrictions.
The council said that while the pandemic is now receding and restrictions are being lifted in many countries of the world, Latvia remains one of the few European Union (EU) members still showing a comparatively high infection rate and trailing most other European nations by vaccine rollout.
“Although some restrictions on economic activity are being gradually eased, several sectors of the economy are still not operating at full capacity,” the council said in a monitoring report released on Thursday.
However, the watchdog noted positive forecasts for Latvia’s economic recovery. The European Commission has revised Latvia’s economic growth perspectives upwards, projecting GDP growth at 3.5 percent for this year and 6 percent for 2022, said the council.
As the Latvian economy is expected to return to growth this year and likely to accelerate in the following years thanks to EU and national investment, the council recommends a phased reduction of government debt to the pre-crisis level so that Latvia could restore its fiscal cushion in preparation for possible future crisis.