2022 state budget passes first Riigikogu reading

MPs at a Riigikogu sitting.
MPs at a Riigikogu sitting. Source: Siim Lõvi /ERR

The bill of Estonia's state budget for 2022, according to which the revenues of the state budget total €13.13 billion, expenditures amount to €13.64 billion and investments will be made in the amount of €716 million , passed the first reading in the Riigikogu on Wednesday.

The tax burden next year will be 33.7 percent of gross domestic product (GDP), which is one percentage point less than this year's level. The general government debt burden will be €6.36 billion next year, or 19.7 percent of GDP, which is some 5 percentage points less than estimated in the spring.

The volume of expenditures exceeds the volume of revenues, but the structural position has improved both compared to the previous year and the state budget strategy for 2022-2025. Defense spending accounts for 2.3 percent of GDP and research and development spending for 1 percent.

The structural budget position of the general government is -2.6 percent of GDP, which is 0.8 percentage points better than planned in the spring. The nominal position is -2.2 percent of GDP, which would help Estonia comply with the budgetary rules of the EU, which have been temporarily suspended during the COVID-19 crisis, already next year. In the spring, it was estimated that Estonia will achieve this goal by 2024. 

The salaries of healthcare workers, teachers, police officers, rescuers and cultural workers will increase next year. The state budget ensures an increase in the salary of healthcare workers agreed in the collective agreement of medical workers -- over 7 percent for the minimum hourly wage of doctors and nurses and over 9 percent for that of care workers. The salaries of state-funded welfare service providers will also rise to the same level as nursing staff.

The deadline for the submission of amendments to the budget bill is at noon on November 3.

Finance minister: The budget will be one for long-term interests

While mitigating the health crisis will continue to be important in next year's state budget, Estonia's long-term interests are again at the center of the plan, Minister of Finance Keit Pentus-Rosimannus said at the first reading of the state budget bill on Wednesday.

Estonia's long-term interest is for the average wage to rise to the top of the European Union and the average pension to equal 40 percent of the average wage, the Reform Party minister said.

She pointed out that next year, the minimum wage of rescuers will rise by 12 percent, doctors' and nurses' salaries will rise by 8 percent, and minimum wages for teachers and graduate cultural workers will increase by more than 7 percent. The average pension will increase by nearly 7 percent to €590.

"Estonia's long-term interest is higher productivity of the economy. Our people's wages and pensions depend on it, as does the greater well-being of our society. Higher productivity is not possible without scientific innovation, without smart and science-intensive business. That's why we will invest 1 percent of GDP, or €324 million, in research and development next year," the minister said.

According to Pentus-Rosimannus, Estonia's long-term interests include being among the winners in international economic competition.

"We want to be a player creating high value in the international division of labor. There is a green and digital technological revolution underway in the global economy. Already in the coming years, the wages and pensions of Estonian people will depend on our success and ability to go along with it on time," she said.

To achieve this, the state will invest €190 million in the green and digital transition next year by tapping into EU structural funds. In the coming few years, the green and digital transition will be funded with a total of more than €2 billion.

Pentus-Rosimannus said that the state budget for next year will also seek to ensure that Estonia is a diverse but united society, where there is no place for segregation.

"We have earmarked an additional €5 million in the budget for the Estonian-language education action plan," she said, adding that the investments in the transition to a single Estonian-language education are made in the interests of the country's residents of other ethnic backgrounds, for the sake of their opportunities for self-realization, income, and life happiness.

"Estonia's long-term interest is the security of the state. To this end - so that the people of Estonia do not have to worry about the independence of their country or the future of the people - we are investing an all-time high of almost €750 million in national defense, 2.3 percent of GDP, to increase the deterrence capabilities of the Estonian state," said the minister.

"Estonia's long-term interest is the safe economic performance of our country in both good times and bad times, without external aid and without policy choices imposed due to debt. Estonia's long-term interest is the financial dignity of the state," Pentus-Rosimannus said.

Demographic changes, which are already underway and will become even more pronounced in the future, must not lead to an increase in the tax burden, which would stifle the entrepreneurial spirit of the Estonian people and the hopes of the middle classes - teachers, doctors and engineers - for a better life. To prevent the tax pressure on the shrinking working-age population from becoming unbearable, containing of public spending and updating the state apparatus are unavoidable, the minister said.

State budget revenues will grow by 17 percent and expenditures by 3 percent next year. Compared with the 4.9 percent structural deficit projected for 2022 a year ago, Estonia will reach a deficit of 2.6 percent with next year's budget.

"There's still ways to go before we can get expenditure and revenue in line again in Estonia, but we nevertheless are taking a long step towards having public finances in good shape, which is in Estonia's long-term interest," the minister added.

Keit Pentus-Rosimannus speaking at a press conference, October 13 2021. Source: Jürgen Randma/Government Office


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Editor: Kristjan Kallaste

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