RIGA, July 9 (Xinhua) -- Latvia's Finance Ministry on Thursday lowered the country's economic growth forecasts for 2026 and 2027 and raised its inflation projections, citing higher energy prices, supply chain disruptions and increased uncertainty following an escalation of conflict in the Persian Gulf.
The ministry said in a statement that it now expects the economy to grow by 2.0 percent in both 2026 and 2027, down 0.6 and 0.7 percentage points, respectively, from its February forecasts. Inflation is projected at 3.6 percent this year and 3.3 percent in 2027.
The general government budget deficit is projected at 2.9 percent of gross domestic product (GDP) in 2026. Under a no-policy-change scenario, however, the deficit is expected to widen to 4.2 percent in 2027 and 5.4 percent in 2028, then narrow to 4.3 percent in 2029 and 3.5 percent in 2030. The projections assume defence spending of 5 percent of GDP from 2027.
The ministry attributed the weaker medium-term fiscal outlook mainly to lower tax revenue due to slower economic growth and higher spending on social benefits, particularly pensions. Government debt is projected to rise from nearly 48 percent of GDP at the end of 2026 to 54 percent by 2030.
The ministry said Latvia's medium-term fiscal space was negative and that spending cuts and revenue-raising measures would be needed to keep the country's finances in line with European Union and national fiscal rules. ■