The paper analyses interaction between fiscal policy and cyclical development of the economy. If the government does not evaluate in time the decrease of economy’s growth potential and allows automatic fiscal stabilisers to work fully in a downswing, but increase of budget revenue is spent during an upswing, the stabilisers may weaken underlying or structural budget position. In order to make an analysis of fiscal policy in compliance with stage of economical cycle, estimations of structural budget balance are used. The structural budget balance is obtained excluding the impact of cyclical fluctuations of the economy from the actual budget balance, wherewith it reflects the result of intentional fiscal policy of the government. The paper analyses the methodology of estimation of the structural budget balance currently used. The estimations of the structural budget balance are based on calculation of output gap and budgetary sensitivity to cyclical fluctuations of the economy. The proposals for further study of structural budget balance methodological problems are given in the paper. Importance of the estimation of the structural budget balance is based on the necessity for Latvia to follow fiscal policy rules joining to the euro zone and to ensure the discipline and sustainability of public finance.