Updated convergence programme of Latvia, 2005-2008 - Main contents
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official title
Council opinion of 14 February 2006 on the updated convergence programme of Latvia, 2005-2008| Legal instrument | Opinion |
|---|---|
| Original proposal | SEC(2006)110  |
| CELEX number i | 32006A0307(11) |
| Document | 14-02-2006 |
|---|---|
| Publication in Official Journal | 07-03-2006; OJ C 55 p. 41-44 |
| End of validity | 31-12-9999 |
7.3.2006 |
EN |
Official Journal of the European Union |
C 55/41 |
COUNCIL OPINION
of 14 February 2006
on the updated convergence programme of Latvia, 2005-2008
(2006/C 55/11)
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 9(3) thereof,
Having regard to the recommendation of the Commission,
After consulting the Economic and Financial Committee,
HAS DELIVERED THIS OPINION:
(1) |
On 14 February 2006 the Council examined the updated convergence programme of Latvia, which covers the period 2005 to 2008. |
(2) |
Over the last decade, annual real GDP growth in Latvia has averaged over 6 %. This growth performance has been characterised by strong productivity developments and more recently also by employment growth. However, high external imbalances have left Latvia reliant on capital inflows, and the foreign debt-to-GDP ratio has risen. Inflation has picked up since mid-2003 and remains above 6 %, eroding the external competitiveness of the economy and posing a threat to growth. The macroeconomic scenario underlying the programme envisages that real GDP growth will ease from 8,4 % in 2005 to 7,2 % on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation and the current account deficit appear to be on the low side. |
(3) |
The programme broadly follows the model structure for stability and convergence programmes specified in the new code of conduct (2). |
(4) |
The estimated general government deficit for 2005 in the present update is 1,5 % of GDP based on GDP growth of 8,4 %. This means a slightly lower deficit and a significantly better growth performance than foreseen in the previous programme (deficit of 1,6 % of GDP, growth of 6,7 %). The Commission services' autumn forecast estimated a deficit of 1,2 % of GDP based on GDP growth of 9,1 %. However, recent data on the execution of the government budget on a cash basis indicate that the outcome will be even better than put forward in the update and the Commission services' autumn forecast. |
(5) |
The Council Opinion on the previous update adopted on 8 March 2005 contained no policy invitations. However, it stated that the assessment of the consolidation path and of the appropriateness of the fiscal position was conditional on the favourable development of the external balance, on demand pressures in the economy, and on the moderation in inflation from its then recent peak. |
(6) |
The updated programme aims at a modest reduction of the general government deficit. The update foresees a general government deficit of 1,5 % in 2005, 1,5 % in 2006, 1,4 % in 2007 and 1,3 % in the final year, 2008. The primary balance is set to decrease by 0,1 of a percentage point over the same period. Both revenue and expenditure to GDP ratios are planned to increase over the programme period (by 2,1 p.p. and 1,9 p.p. respectively). Public investment and not separately identified ‘other’ expenditure increase the most (from 2,3 % of GDP in 2005 to 3,3 % of GDP in 2008 and from 12,3 % of GDP to 13,8 % of GDP in 2008, respectively) and social transfers other than in kind decrease the most (from 9,3 % of GDP in 2005 to 8,9 % of GDP in 2008). Compared with the previous update, the November 2005 update broadly confirms the planned adjustment, although the growth outlook is considerably stronger. |
(7) |
Based on Commission services' calculations on the basis of the programme according to the commonly agreed... |
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