Impact of EU funds on Latvia’s national economy – very positive
„The study of EU funds and Cohesion Fund impact on Latvia’s macroeconomics shows that total contribution of EU funds in 2004–2006 to development of national economy was very positive ensuring stable and significant GDP growth. Initially – in 2004 and 2005 – this impact was comparatively small, but in 2006 and 2007 it amounted to almost 3% of GDP”, indicated the Minister for Special Assignments for Administration of European Union Funds Normunds Broks (TB/LNNK) in the press conference on May 26 when the results of the study were announced.
During the study “EU funds macroeconomic impact assessment” which was carried out by Baltic International Centre for Economic Policy Studies (BICEPS) it was concluded that impact of funds on both inflation and external trade balance in 2004 and 2005 was unfavourable, but already in 2006 it was positive. In respect to the new EU funds programming period 2007-2013 it is forecasted that Latvia’s GDP could rise even by 20% annually because of the EU funds support.
In 2004, EU funds made a little bit more that 1% of GDP; however in 2012, it is forecasted to be 2.9% of GDP. Besides the amount of funds is comparatively big, they cause macroeconomic impact on all the economy, rather that only particular sector where the funds are utilized.
The authors of the study have come to conclusion that impact of EU funds on inflation and external trade balance in 2004 and 2005 could, possibly, be unfavourable, but in 2006 – favourable. Nonetheless, it should be underlined that development of both inflation process and external trade balance was mainly influenced by other factors, rather than EU funds.
„This assessment shows that during the slowdown of national economy it is necessary to continue deliberative EU funds management policy not reducing their importance. In nearest years contribution of EU funds in national economy will increase several times – thus it is important to use these resources exactly for macroeconomic stabilisation. Here I completely agree with the opinion of I.Rimševics, the Governor of the Bank of Latvia, saying that it is essential to continue provide support to entrepreneurship and export. The latest statistical data also indicate that Latvia has shown one of the best results in export growth and trade balance dynamics among all the EU states”, concluded N.Broks.
In the study conclusions were made also about the funds acquisition by regions – during the time period from 2004 till 2008 Riga region (Riga City and Riga surrounding) received 26% of all the EU resources or 146.9 million lats including EU resources and state co-financing. Vidzeme received the biggest share of financing – 30% of 165.5 million lats, rest of resources were more or less allocated to Kurzeme (17% or 97 million lats), Latgale (13% or 76.4 million lats) and Zemgale (12% or 71 million lats).
For information -
Within last nine months Baltic International Centre for Economic Policy Studies carried out the EU funds macroeconomic impact assessment for Latvia for two programming periods – from 2004 till 2005 and from 2007 till 2013. The used approach is the first such kind of work performed by Latvian economists and it corresponds to best international practice in this field. The initial results are already known.
The approach used in the study consists of 5 sector Latvian economy model where the EU funds are included – firstly, for the time period from 2004 till 2006, and then for the time period from 2007 till 2013 (practically, the modelling is being performed till 2015). This modelling approach is characterized by at least two advantages: firstly, it is a systematic and consequent way of funds impact assessment and, secondly, it allows joining two separate effects of the funds impact – demand effect caused by funds inflow and offer effect which becomes apparent through better infrastructure, bigger capital and higher quality human resources.
Lita Kokale
Ministry of Finance
EU Funds Department
PR Division
Phone: +371 67083880; +371 2 6469946
Lita.Kokale@fm.gov.lv
