Fiscal council warns Latvia's budget gap could near €1 billion by 2030
Latvia's Fiscal Discipline Council says that without real structural spending cuts and new revenue sources, the state budget's fiscal space could turn negative by more than €936 million in 2030. Uncertainty over airBaltic and Rail Baltica funding adds further risk.
Latvia's Fiscal Discipline Council has urged the government to move from merely reviewing spending to actually cutting it structurally, warning that shrinking EU funding combined with rising defense and healthcare costs will squeeze the state's fiscal room in coming years.
According to the council's latest monitoring report, the new government has set a goal of reaching a balanced budget by 2030, but has not set a specific debt-reduction target and does not plan a general tax increase. At the same time, defense spending is set at 5% of GDP and healthcare at 12% of total government spending.
Growth and risks
While the economy grew 2.8% in real terms in the first half of 2026, the Finance Ministry's updated forecasts for 2026-2030 project average annual GDP growth of only about 2.2%. EU fund financing is expected to fall from roughly €2.1 billion in 2026 to €0.7 billion in 2030, threatening public investment levels.
Revenue challenges
Although consolidated budget revenue grew 10.3% in the first seven months of this year, nearly half of that increase came from foreign financial assistance, which the council says cannot be relied on as a stable source. Tax revenue is falling short of plan, and its share of GDP is projected to drop from 34.6% in 2025 to 32.9% by 2030.
Debt and fiscal space
Public debt, currently at 46.9% of GDP, is forecast to rise to 53% by 2029-2030, while annual interest payments are expected to climb from €606 million in 2026 to €901 million in 2030. The council's estimates show negative fiscal space widening from €28 million in 2027 to €936.2 million in 2030.
Additional risks stem from airBaltic's financial restructuring, which may require further state support, and from Rail Baltica, where the implementation model remains unclear. The council also stressed the importance of defending Latvia's interests in negotiations over the EU's next multi-year budget, since foreign assistance accounts for about 10% of the country's consolidated budget revenue.
