Potentially risky fiscal stance

March 2005
Emerging Europe Monitor: Central Europe & Baltic States;Mar2005, Vol. 12 Issue 3, p11
Country Report
Country Report
This article reports that while a moderate budget deficit is targeted for 2005, a tighter fiscal stance may be warranted given the cyclical position of the economy and increasing external vulnerabilities. With the two largest political parties now forming the core of the new government, the prospect of policy discipline has improved. But this means less likelihood of fiscal slippage, rather than a greater appetite to take an axe to public spending should the economy overheat. Of the 10 new EU member states, Latvia's fiscal performance in 2004 was bettered only by Estonia. Initially planned at 2.1% of GDP, the general government budget deficit appears to have ended the year at a little over 1%, mainly because faster-than-forecast increases in real GDP and inflation delivered a substantial boost to tax revenues.


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