In LatviaYesterday, 19:28, a surplus of 68.8 million euros in the consolidated state budget

The Ministry notes that according to the data published by the State Treasury, the consolidated budget balance has improved by almost 50 million euros in the eight months of 2023, reaching a surplus of 68.8 million euros.

In the Ministry, the improvement of the balance is explained by significantly lower expenses for support measures, basically the need to finance expenses related to Covid-19 has decreased. At the same time, the situation is not yet comparable to the pre-pandemic period, when a significant surplus was accumulated in the consolidated general budget until autumn, which rapidly decreased in the last months of the year, due to a significant increase in expenses.

Also this year, closer to the end of the year, FM expects higher expenses, as the state makes final payments for implemented projects and orders.

In the eight months of 2023, the revenues of the consolidated budget increased by 1.2 billion euros, or 12.8%, compared to the corresponding period of last year. On the other hand, the total budget expenses were 1.1 billion euros or 12.2% higher than a year earlier.

Higher general budget revenues and lower expenses for support measures have generally improved the general budget balance, but the situation by budget levels is still very different, where changes in expenses for social payments have a big impact, according to the FM.

The increase in total budget revenues was mainly ensured by tax revenues, which were collected in the eight months of this year in the amount of 8.2 billion euros, including the balance in the unified tax account, and were 837 million euros or 11.3% higher than in the eight months of last year.

FM informs that a good rate of growth can still be observed in labor tax revenues. In sectors with a high proportion of the minimum wage, a significant increase in labor taxes can be observed for employees, which is connected both with the rapid increase of the minimum wage in the country on January 1 of this year from 500 to 620 euros, and the increase in the wages of the employees. In the first half of this year, the average wage in the national economy increased by 12.2%, reaching 1493.5 euros.

On the other hand, despite the rapid increase in value added tax (VAT) revenues in the period by a total of 14.9%, the data of the State Revenue Service (SRS) show that compared to the corresponding period of last year, the growth rate of VAT revenues decreased in the last three months. The fastest reductions in VAT revenue rates are observed in trade and energy supply, which were affected by the decrease in trade volumes. Due to the high prices of food and non-food goods, retail sales volumes decreased by 2.1%.

The FM notes that the taxes paid by these industries account for the largest share of all VAT revenue, so this change has a significant impact.

FM also highlights the rapid increase in corporate income tax (CIT) revenues – they were 47.6% higher in the eight months of this year than in the corresponding period a year ago. Larger contributions of this tax can be observed in trade, forestry and energy sectors.

The non-tax revenues of the general budget, which in the eight months of 2023 were 803.7 million euros, or 158.3 million euros or 24.5% higher than last year, were basically promoted by the dividend payments of the country’s largest capital companies in the first half of the year, the FM explains.

In May of this year, AS “Latvenergo” paid 134 million euros in dividends to the state from last year’s profit, which is 63.8 million euros more than the year before. AS “Latvijas valsts meži” paid out 91 million euros more in dividends in June this year than last year, or 162.5 million euros.

On the other hand, in the eight months of this year, 29.3 million euros or 27% more than in the corresponding period a year ago were collected in state fees, including the state fee for maintaining oil product safety reserves in the amount of 23.1 million more than in the corresponding period a year ago.

FM reports that the increase in basic budget expenses in the eight months of this year is significantly lower than the increase in revenues, contributing to the improvement of the balance sheet, where the deficit of 166.7 million euros was 429.3 million euros less compared to the eight months last year.

The FM explains the slowdown in the growth rate of expenses with lower basic budget expenses for support measures than in eight months a year ago. However, significantly better use of funding from European Union (EU) funds this year has been reflected in the increase of subsidies and grants of the basic budget, as well as capital expenditures, thus foreign financial aid expenses in the national basic budget reached one billion euros in the eight months of this year, which is 421.3 million euros more than last year in the corresponding period.

In the opinion of the FM, the increase in expenses can be attributed to a very high level of expenses at the end of the projects of the 2014-2020 planning period, as well as to the more active initiation of the Rehabilitation Fund projects. If in the eight months of 2022, 316 million euros or 44% of the amount planned in the budget were invested in Cohesion policy fund projects, then in the eight months of this year 506.4 million euros or 55% of the planned amount were implemented.

Basic budget expenditures for subsidies and grants in January-August this year increased by 207.8 million euros or 10.1% compared to the eight months of 2022, reaching 2.3 billion euros. The FM explains this with significantly higher expenses for support measures to reduce the rise in energy resource prices, as well as with almost twice as much, or by 272.6 million euros, expenses for investments for the implementation of EU co-financed projects, which are intended for energy efficiency measures for apartment buildings, centralized heating and health care infrastructure, as well as for the purchase of electric trains.

Capital expenditures in the state basic budget in the eight months of this year amounted to 556.9 million euros, increasing by 134.4 million euros or 31.8%. Among them, the expenses of the state basic budget for the formation of fixed capital, not taking into account transfers to local governments, were 144.6 million euros or 50.1% higher than a year earlier. More than half of the increase in fixed capital formation expenses, or 79.1 million euros, was made up of the increase in expenses for the implementation of EU co-financed projects, including 66.5 million euros more invested in construction projects in the traffic sector, and for the purchase of computer equipment, communications and means of transport in the education and health sectors – by 9.3 million euros more. The rest of the increase in fixed capital formation expenses was mainly ensured by the 20.7 million euros allocated in January for the construction of a new prison in Liepāja, the 30.8 million euros allocated to the implementation of projects supervised by VAS “Valsts nekustamie espasumi” and by spending 61.9 million euros more on capital repair, reconstruction and construction projects , as well as for the purchase of vehicles in the departments of defense and internal affairs.

On the other hand, the basic state budget expenditures for social payments decreased by 139.6 million euros or 26.3% in eight months of the year. The FM explains the drop in expenses with a significantly higher expense base in the corresponding period of 2022, last year paying one-time benefits to families and seniors to compensate for the negative effect from the increase in energy prices.

The state special budget has a surplus of 112.8 million euros in eight months, and compared to eight months last year, it has decreased by 237.5 million euros. On the other hand, an increase of 418.1 million euros or 18.6% was observed for the social payments of the state’s special budget expenditures. Among them, expenses for old-age pensions increased by 385.1 million euros or 25.4% in eight months, taking into account the rapid indexation carried out last year. A similar rate of growth is also observed for expenses for disability pensions, where there is an increase of 32.6 million euros or 22.7%. Since this year pensions will no longer be indexed with such a high indexation coefficient as in 2022, expenses will not increase so rapidly in the future, the ministry says.

The FM also states that with a 30.2% decrease in the number of recipients of sickness benefits, expenses for sickness benefits decreased by 32.9 million euros or 13%, but compared to the eight months of 2019, the number of recipients of sickness benefits is still 21% higher . Meanwhile, the expenditure on unemployment benefits remains close to last year’s eight-month level, increasing by 3.9 million euros or 4%, where the 12% decrease in the number of benefit recipients was offset by an average increase in the amount of benefits granted by 51.1%.

Meanwhile, the labor force survey data of the Central Statistical Office show that the unemployment rate in the second quarter of this year was 6.4%, or 0.2 percentage points lower than in the corresponding quarter a year ago and the same as in the first quarter of this year.

In the municipal budget, the eight months of 2023 ended with a surplus of 74.2 million euros, which is 139.3 million euros less than in the corresponding period a year ago. Although revenues in the local government budget increased by 217 million euros or 10.3%, local government budget expenses continue to increase faster – by 356.3 million euros or 18.8%, and expenses are growing in almost all expenditure items.

The largest increase in the municipal budget can be seen in compensation expenses, which reached 1.1 billion euros in the eight months of 2023, or 166.2 million euros (18.4%) more than in the corresponding period a year ago. The increase is due to a significant increase in the minimum wage in the country, as well as an increase in expenses for teachers’ salaries. Also, expenses for goods and services continue to increase, which this year was 522.9 million euros, or 93.8 million euros (21.8%) higher than in the eight months of 2022, according to the FM.

The high prices of energy resources also significantly increased expenses during last year’s heating season, which continued until April this year. Municipal budget expenditures for heating from January to the end of April this year were 52.3 million euros, which is twice or 26.1 million euros more than in the corresponding period a year ago. Also, as a result of the price increase, municipalities spent more on electricity, fuel, catering, as well as on real estate and road maintenance.

The ministry adds that spending on municipal social payments has also increased, which in the eight months of this year was 30.6 million euros or 25.6% higher than in the corresponding period a year ago. Expenditures increased for housing benefits, which are mainly related to providing assistance to Ukrainian refugees, as well as for payment of municipal social services, including social care at home and services provided by social rehabilitation institutions.

In the municipal budget, similarly to the national budget, an increase in expenses can be observed in the last months of the year, when municipalities make final payments for the delivered goods and services, therefore at the end of the year, FM expects a small deficit in the consolidated budget of municipalities.

In FM’s assessment, the budget deficit of the general government this year will be significantly lower than predicted during the preparation of the Stability Program this spring. If in the Stability Program for 2023-2026 the deficit of the general government was predicted at 4% of the gross domestic product (GDP), then, taking into account higher tax and non-tax revenues and lower expenses, the deficit could reach 1.2 billion euros or 2.7% this year of GDP.