Latvia's MacroeconomicOptions in the Medium Term: Fiscal and Monetary Challenges of EU Membership

Monga, Celestin

World Bank, Washington, D.C.

关键词: ACCOUNTING;    ADMINISTRATIVE PROCEDURES;    AGGREGATE DEMAND;    AGRICULTURE;    AUDITS;   

DOI  :  10.1596/1813-9450-3307
RP-ID  :  WPS3307

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Latvia's experience over the pastdecade shows that economic growth and real convergence canno longer be assumed to be exogenously driven processesdetermined by given technological improvements andrelatively higher factor returns. Instead, it is anendogenously driven process led by many variables, includingpolicy variables. European Union membership clearly bringsenormous economic benefits to Latvia. However, it alsobrings important challenges on the macroeconomic front,especially prior to the adoption of the euro. Substantialprogress has been made toward fiscal consolidation since themid-1990s but several risks remain. Given the facts thatdomestic demand remains buoyant and that Latvia will have toaccommodate the expenditure commitments associated with NATOand EU membership while simultaneously aiming to fulfill themedium-term goal of a balanced budget, a more prudent fiscalpolicy should be the main short-term policy objective. Theauthorities should therefore reassess their currentmedium-term budget framework and strengthen their fiscalrules so that off-budget spending is eliminated and controlsover spending ministries and local government finances arereinforced. They should also rethink any further taxreductions until a clear strategy is designed forcompensating for projected losses in government revenues.Monetary policy can contribute to sustainable growth and jobcreation in Latvia in the medium and long term by providingan environment for price stability. It will have to becomplemented by further microeconomic reforms and prudentwage developments aligned with productivity growth.