Government deficit 2.7 percent of GDP in August

Ministry of Finance.
Ministry of Finance. Source: Siim Lõvi/ERR

The deficit of the Estonian government sector equaled 2.7 percent of GDP, or €801 million, at the end of August, having declined by €171 million compared with the same time last year, the Ministry of Finance said on Friday.

The decrease is mainly due to increased tax revenues and lower supplementary budget expenditures compared to the previous year, the ministry said.

Risto Kaarna, chief specialist at the fiscal policy department of the Ministry of Finance, said there has been a methodological change in the state budget position concerning the suspension of state payments in the second pillar.

"Eurostat has issued the guideline that it should be treated as a debt to the private sector, which means that if it was previously accounted for as government revenue, it cannot now be recorded in this way. Compared to the previous year, the budget position in the state accounts has been adjusted by -€147.5 million last year and -€205.5 million this year. Compensation for suspended payments in 2021-2024 is correspondingly a correction of the position compared to the latest forecast," Kaarna said in a statement.

The analyst said the budget deficit of the Unemployment Insurance Fund was €29.4 million by the end of August due to the increased costs of unemployment insurance benefits and the wage support measure.

"At the same time, compared to the first eight months of 2020, the deficit was €274.5 million lower, as the wage support measure planned with the supplementary budget was smaller this year and part of the costs were also covered by the funds allocated to the Unemployment Insurance Fund with the supplementary budget," Kaarna said.

He said the Health Insurance Fund's budget surplus has increased by €50 million compared to the previous year to €92.4 million thanks to the operating support provided from the state budget to compensate for the receipt of social tax lower than the pre-crisis level.

The budget surplus of local governments decreased by €63.6 million to €10.2 million in August. According to the analyst, the surplus is €123.3 million eros lower than last year, mainly due to active investment activities.

"Although the state has allocated quite a large amount of investment subsidies to local governments, they can be accounted for at the end of projects. In other words, according to the Ministry of Finance, the larger minus is due to pending investments. The result of the main activity is similar to the previous year," Kaarna said.

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Editor: Helen Wright

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