This will bring the budget deficit to 2.9% of gross domestic product (GDP). Next year’s budget focuses on strengthening the security and competitiveness of the country.
52 coalition members voted in favor of next year’s budget and the budget framework for 2025-2027, and 34 voted against.
The days of the budget debate were not without fierce debates, criticism of the coalition and disputes between opposition groups. Unlike the budget debates in the Saeima in previous years, this time the coalition representatives, including several ministers, took a more active part in the debates instead of just listening to the opposition’s criticism.
Prime Minister Evika Siliņa (New Unity), has pointed out that strengthening Latvia’s security in the context of Russia’s war in Ukraine is a key priority for 2025. The plan is to continue strengthening Latvia’s external borders, providing adequate equipment for the national defense service, further developing defense infrastructure, including the Sēlija training ground, and supporting Ukraine until its victory.
The 2025 budget provides for additional funding to increase the salaries of the direct guardians of Latvia’s internal and external security, i.e. internal affairs officers – policemen, border guards, firefighters – and the staff of the Prison Administration. In total, an additional EUR 284.3 million will be allocated to strengthen Latvia’s internal and external security, including support for Ukrainian civilians in Latvia.
The draft budget for 2025 foresees changes in labor taxes. It has also been decided to continue the application of a reduced VAT on local produce and to introduce a superprofits tax on banks. Excise tax on tobacco, fuel, natural gas and soft drinks, and vehicle exploitation tax will be raised.
In 2025, local governments are projected to see an average increase of 10.3% in equalized revenue compared to 2024.
The government has earmarked a special grant of €2.5 million for the municipalities on the external border of the European Union: the municipalities of Alūksne, Augšdaugava, Balvi, Krāslava, and Ludza.
According to the Ministry of Finance’s forecasts, Latvia’s GDP will grow by 2.9% in 2025, 2.8% in 2026 and 2.6% in 2027. Average annual inflation is forecast to be 2.2% in 2025 and 2.5% in 2026 and 2027.
The general government budget, which covers the entire structure of state and local government and social security institutions, is planned to raise total revenue of €18.4 billion and to spend €19.7 billion.
The general government budget deficit for 2025 is thus planned at €1.3 billion, or 2.9% of GDP.
In 2025, the consolidated general government budget is projected to raise revenue of €15.1 billion and to spend €17.1 billion. Compared to the 2024 budget, the 2025 state budget is projected to raise €583.2 million in revenue. State budget expenditure, on the other hand, is €876.5 million higher than in the 2024 State Budget Law.
Basic budget revenue in 2025 is forecast at €10.2 billion, while basic budget expenditure is planned at €12.7 billion. The increase in the state budget’s basic expenditure compared to the 2024 budget plan is 4.3%, or €523.7 million.
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