In order to reduce negative impact of Covid-19 crisis, Latvia must support small and medium-sized enterprises - European Commission

  • 2020-05-20
  • LETA/TBT Staff

RIGA - To reduce the negative impact of the Covid-19 crisis, Latvia must support small and medium-sized enterprises, as well as finance projects with a high degree of readiness, says the European Commission (EC).

On Wednesday, the EC recommendations for Latvia in 2020 were published, which, among other things, analyzed Latvia's economic policy, taking into account the economic and health crisis caused by Covid-19. The EC's specific recommendations to Latvia are based on overcoming the crisis and reviving the Latvian economy.

According to EC forecasts, due to the crisis caused by Covid-19, the Latvian economy is expected to decline by 7 percent this year, unemployment will increase to 8.6 percent by the end of the year, and price growth will approach zero this year.

The budget deficit is expected to reach 7.3 percent this year and 4.5 percent next year. The EC has estimated that the support measures already implemented by the Latvian government to alleviate the Covid-19 crisis have exceeded 3 percent of GDP or one billion euros.

The EC also forecasts that government debt will rise to 43.7 percent of GDP this year, but will remain below the "Maastricht ceiling" of 60 percent.

At the same time, the EC notes that a "block exemption clause" is currently in place, which allows countries not to assess their budget deficits and government debt this year. The EC has created a "budgetary space" for Latvia to effectively fight the virus, maintain economic viability and support recovery.

The EC also encourages, if the economic situation allows, balancing the budget, ensuring the sustainability of government debt and encouraging investment. The EC also recommends that Latvia strengthen the sustainability and accessibility of the health care system by supplementing human and financial resources.

The EC also recommends ensuring adequate access to finance, especially for small and medium-sized enterprises, as well as pre-financing high-maturity public investment projects. The EC also recommends that Latvia support private investment to promote economic recovery.

It is also recommended that Latvia focus investments on green and digital projects, especially on research and innovation, clean and efficient energy production and consumption, sustainable transport and digital infrastructure.