Finance minister: Downturn bigger than first thought, but hard to predict

Finance minister Martin Helme (EKRE) on Wednesday's
Finance minister Martin Helme (EKRE) on Wednesday's "Esimene stuudio". Source: ERR

The finance ministry is predicting an economic downturn of around 8 percent in the wake of the coronavirus pandemic and its aftershocks, a significant revision of its autumn forecast, which had predicted growth of 2.3 percent. Tax revenues will also fall significantly this year, the ministry said.

The new figures, finance minister Martin Helme (EKRE) said, take into account developments in the economies of both Estonia and the whole world following the global pandemic.

The downturn will also leave a €1.6 billion-sized hole in the state budget which was signed into being last fall, as it drops from €11.8 billion to €10.2 billion.

"The impending recession will lead to a massive decline in tax revenues, affecting all sectors and levels," Helme said Thursday, according to ERR's online news in Estonian.

Helme also issued caveats on the forecast, noting that much hinges on the success of the government's mitigation package, following the supplementary state budget sparked by the pandemic and presented to the Riigikogu on Thursday, as well as the vagaries of the changing economic situation.

The downturn could be halved if the measures are fully successful, he saud.

The supplementary budget, which amounts to €1.15 billion of measures, or 4.4 percent of Estonia's GDP, would bring a nominal defecit of 10.1 percent of GDP. The structural deficit currently stands at 5.5 percent of GDP, but this is not a reliable indicator at present, Helme said.

The forecast is even more pessimistic than it had been just four days ago, on Monday, when the ministry had preicted a 3 percent downturn.

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Editor: Andrew Whyte

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