Government amended Latvia’s Convergence Programme 2008-2011

Ministry of Finance, 13.01.2009

On Tuesday, January 13, the Cabinet of Ministers (CoM) approved Latvia's Convergence Programme 2008-2011 updated by the Ministry of Finance (MoF). Convergence Programme comprises comprehensive information about medium-term fiscal, economic and monetary policy, financial quality and institutional features of the Member State. The euro changeover date also will be named on the basis of the Convergence Programme.  

Amendments were introduced in the Convergence Programme according to the Economic Stabilisation and Growth Revival Programme accepted in December, 2008 and state budget 2009 amendments. According to the updated Convergence Programme reduction of GDP is projected from 2008 till 2010 due to decrease in private consumption and investment amount. Forecasts of the MoF show that economic growth revival will start in the end of 2010 and in 2011. Key elements of the economic growth will be tradable sectors which will improve their competitiveness both in external and internal markets. It is planned that investment amount will start to increase in 2011; similarly private consumption will also revive in 2011.

It is projected that in 2009 due to reduced demand the inflation will continue to drop. However, inflation decrease will be gradual, but in the beginning of 2009 it is planned that the inflation will grow because of significant increase in value added tax (VAT) rate and excise duty rate. However, in 2010 and 2011 inflation could continue to fall down due to revival of economic activity, moderate wage increase and productivity improvements.

The Programme deals with scenario when macroeconomic corrections and adaptation of national economy structure take place in 2009 and 2010; economic growth revives in the end of 2010 and continues in 2011. However, the Programme also outlines several risks that could hinder development of national economy and reinforce economic slowdown.     

The Convergence Council allows the Council of Europe to monitor, analyse and coordinate budget positions of the Member States and according to that the Council can recommend in its opinion policy measures for each country. The goal of this process is to ensure more stringent budget discipline by monitoring and coordinating budget policy in the euro area and EU.