The spring forecast of the Ministry of Finance puts the Estonian budget deficit for this year at 1.66 billion euros, or 4.3% of GDP. Assuming no change in policy, the deficit will remain at 4% of GDP at least in the next four years, and the government debt will grow rapidly to 33% of GDP.

The recently signed coalition agreement sets the target for the new government of starting to reduce the budget deficit. The government has set the goal in the stability programme 2023 of keeping the deficit from exceeding 3% of GDP in 2024. This would need the fiscal position to be improved by around half a billion euros from what was in the spring forecast.

The Fiscal Council finds that setting a fiscal target like this is appropriate, and achieving it should help ensure compliance with the fiscal rules in 2024. The budget deficit needs to be reduced as that will help slow the growth in Estonia’s debt burden and restrain inflation.

The Fiscal Council considers that the budget deficit should continue to be reduced gradually after 2024 as well. It consequently recommends that the government present its longer-term plan for restoring public finances in the autumn when the state budget strategy for 2024‒2027 starts to be written.

The Fiscal Council's opinion and a more thorough explanatory report can be found here.

Additional information:
Andrus Alber
Vice-chairman of Fiscal Council
Tel: +372 526 1707
Email: info@eelarvenoukogu.ee