Riga, May 1, LETA. Latvia’s economic recovery plan includes the risks of overheating in the construction sector, according to an analysis of an expert group set up by the Fiscal Discipline Council (FDP) in cooperation with the Latvian Productivity Council on Latvia’s application for European Recovery and Stability Mechanism or EU Recovery Fund funding.
On Tuesday, the Cabinet of Ministers supported Latvia’s application to attract 1.82 billion euros from the EU Recovery Fund.
When assessing the macroeconomic impact of the Latvian Economic Recovery Plan on economic development, researchers point to risks and opportunities to minimize them.
According to experts, one of the most significant risks is related to the overheating of the construction industry, taking into account the large planned amounts of investment in the economy in the next 7-8 years, including the construction of Rail Baltica.
“It is therefore important to determine how this will affect labor and construction material costs and it would be useful to allow foreign companies to be more temporarily involved in construction in order to ensure competition. In connection with Latvia’s economic recovery plan, it would be worth changing the investment structure. construction, “experts said.
According to the calculations of the Ministry of Finance, in the structure of the Latvian economic recovery plan, the largest part of investments is focused on infrastructure development – in general, expenditures on infrastructure projects account for 65% of total investments.
The second risk, according to experts, is related to the return on investment and quality. According to the report, the implementation of public infrastructure projects provides a strong impetus for economic activity in the short and medium term, as well as significantly contributes to long-term economic development. “However, it must be taken into account that poor project management, including planning, selection and implementation, poses significant risks to the economy. When planning projects, it is important to assess their compliance with general objectives and performance in addressing Latvia’s competitiveness issues identified in the world’s leading indices,”
LETA has already reported that on Tuesday, the Cabinet of Ministers supported Latvia’s application to attract 1.82 billion euros from the European Union (EU) Recovery Fund.
Latvia’s application to the EU Recovery Fund envisages allocating 676.2 million euros to climate change mitigation projects, 365.29 million euros for digital transformation, 370 million euros for reducing inequality, 181.5 million euros for health and 37 million euros for the rule of law.
According to the plan, 40% or 643.21 million euros of the EU Recovery Fund will be direct support to businesses, slightly less than 60% or 1.15 billion euros will be public procurement for businesses, and public administration expenditures will amount to 26.64 million euros.
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