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Latvia urged to tackle income inequality as economy grows

Xinhua, February 24, 2017 Adjust font size:

As the Latvian economy looks to grow fairly strongly, the problem of income inequality should be dealt with, a senior European Commission official has said.

Latvia would see a fairly strong growth, said Latvia's former prime minister Valdis Dombrovskis, who is now the Commission's Vice President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and the Capital Markets Union.

Latvia's economic growth will be driven by resumed investment activity, continued consumer spending growth and more dynamic growth in Latvia's key export markets, he said.

"Since its economic growth has been fairly balanced, Latvia is not among the countries likely to face an in-depth evaluation as part of the macroeconomic imbalances procedure," Dombrovskis said.

Income inequality in Latvia, however remains high and that measures have to be taken to deal with this issue by shifting the tax burden from low-income groups to other tax bases and ensuring more targeted social assistance, he said.

Dombrovskis also called for continued reforms in vocational education, adjusting professional training programs so the labor market's demands.

In its latest analysis of the economic and social situation in the EU member states, the European Commission projects Latvia to grow by 2.8 percent this year and 3 percent next year.

The unemployment rate is expected to decline from 9.5 percent this year to 9 percent in 2018.

According to the Commission's forecasts, Latvia's annual inflation will rise to 1.9 percent this year and 2 percent in 2018.

The European Commission emphasizes inequality as a serious issue holding back development.

Latvia's tax and benefit system remains less effective in reducing income inequalities than the EU average, according to the Commission's report.

The heavy tax burden on small wages does not encourage official employment, and weaknesses in providing public services affect the quality of the workforce in terms of education, skills and health, it said. Endit