Budget Deficit and Public Debt in the Baltic States in 2010-2015

Abstract

The economic crisis of 2009 sparked a sharp increase in deficits and public debt among most EU countries. While states with different capacities and fiscal policies intervened to alleviate the effects of the crisis, results varied. This article focuses on macroeconomic developments, including public deficit and debt in the Baltic States: namely, Lithuania, Latvia, and Estonia. The main purpose of this analysis is to examine the level of deficit and public debt between 2010 and 2015. We also seek to examine the relationship between deficit and public debt levels and GDP growth rate. We rely on statistical and comparative analyses. We compare domestic deficit and debt figures to the average among EU member states. Our statistical analysis reveals no high correlation between the growth of GDP and reduction of the budget deficit in the three countries. This largely depends on the public finance policy pursued by the government.