Latvia’s budget was 68 million euros in the red in February / Article

The general budget revenue in January-February of this year was 2.9 billion euros, down by 20 million euros or 0.7% compared to the corresponding period of the previous year.

“The decrease in revenue is mainly explained by the lower amount of revenue from foreign financial assistance (FFA), including repayments from the European Commission (by 160.8 million euros) than a year earlier, which is in line with the investment cycle of European Union (EU) funds,” said the Ministry.

Non-tax revenue was also lower, with 135.9 million euros collected in the general budget in the first two months of 2025, i.e. by 18.7 million euros or 12.1% less than last year. This is mainly explained by the 24.2 million euros in fees paid by commercial banks in January 2024, which was paid out in compensation to support mortgage borrowers in the following months.

General budget tax revenue, including the balance in the single tax account, was collected in the first two months of this year by 167.9 million euros, or 8% more than in the corresponding period of 2024, amounting to 2.3 billion euros. In total, the two-month general budget tax plan (excluding the balance in the single tax account) was exceeded by 66 million euros this year and amounted to 102.8%.

The largest increase in the first two months of this year was in corporate income tax (CIT) revenue, which increased by 69.9 million euros, or 80.1%, compared to last year and amounted to 157.1 million euros. The increase could be explained by the distribution of a larger amount of profit at the end of 2024, with companies paying dividends to individuals, as from 2025, an additional personal income tax (PIT) rate of 3% will be applied to income exceeding 200,000 euros.

Analyzing the general budget expenditures, which amounted to 2.9 billion euros in the first two months of 2025, the increase is 229 million euros or 8.4% compared to the corresponding period last year.

Rail Baltica’s expenses in the state basic budget in the first two months of 2025 reached 41.4 million euros, which is an increase in expenses of 23.6 million euros compared to the two months a year ago. The implementation of new investment projects under the EU Cohesion Policy funds is also starting and is taking place more intensively, within which payments from the state budget in the first two months of this year were 23.5 million euros higher than last year and amounted to 64.2 million euros. In the budget of local governments, compared to the first two months of the year, there is also an increase in expenditures for the implementation of EU fund projects.

“The increase in general budget expenditures continues to be influenced by expenditures for the purchase of air defense systems in the defense sector, where an advance payment of 121.4 million euros was made in February of this year,” said the Ministry.

If in February of last year, expenditures (145.3 million euros) within the framework of the purchase contract for these systems were classified as capital expenditures, which in turn largely explains the decrease in general budget capital expenditures (177.3 million euros) in the first two months of this year by 74.3 million euros or 29.8%, then this year these expenditures will be used for military equipment, thus increasing general budget expenditures for goods and services, which in total in the first two months of this year were 416.4 million euros, which is 96 million euros or 30% higher than a year earlier.

The Ministry also said that it is currently workig on updating the general government budget forecasts “for this year and the medium term” based on the data from February. Its current prediction for GDP is an increase of 1.2% in 2025 and just over 2% in 2026 and subsequent years. 

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