Finance Ministry: Increased tax receipts reduced state budget deficit

Money. Source: Siim Lõvi/ERR

As of the end of October, Estonia's budget deficit stood at €44 million, or 0.12 percent of expected annual GDP, the Ministry of Finance said Tuesday.

At the same time last year, the budget deficit stood at 1.6 percent of GDP. One reason for the improved standing was an increase in tax receipts resulting from rapid price increases; non-tax revenues increased as well. A supplementary budget was also passed at the same time last year which gave rise to bigger expenditures.

The central government's budget deficit stood at €234 million as of the end of October, an improvement of €348 million over the same month last year. The last time the central government's deficit in the second half of the year was this small was prior to the COVID-19 crisis.

This good position was due to both strong tax revenues as well as lower than expected costs. Income tax receipts remain robust even despite the fact that a significant amount of extraordinary income tax was received last October on money withdrawn from people's second pension pillars.

Behind the significant tax revenue are both the growth of the general wage fund as well as income tax paid by those to exit the second pension pillar, which is on a smaller scale this year. Both, in turn, are being driven by rapid price increases. In the first ten months of 2022, income tax receipts had risen 17 percent on year.

The Estonian Health Insurance Fund's (Haigekassa, EHIF) budget surplus, meanwhile, increased by €18 million on year to €130 million. As of the end of October, the Estonian Unemployment Insurance Fund (Töötukassa, EUIF) was likewise in a surplus of €29 million, an improvement of €55 million on year. The last time the EUIF was in a current surplus was in 2019.

Local governments' budget surplus totaled €32 million at the end of October, marking an improvement of €40 million on year.

Government sector's October budget position by subsector. Source: Ministry of Finance

The total expenditures of state budgetary institutions in October increased 11.5 percent on year to €1.2 billion. The biggest increases in expenditures that month were deferred tax revenues and granted domestic support.

Expenditures impacting the state budget position, i.e. expenditures excluding external funds and deferred tax revenues, grew from €663 million to €725 million this October.

Management costs that month went up 21.4 percent on year, i.e. by €16.7 million. The biggest increases were defense expenditures for the procurement of ammunition, the provision of social services as well as fuel costs.

Labor costs in October went up by €9.5 million, or 11 percent, on year.

Compared with October of last year, investments grew 6.1 percent, or by €2.3 million, due primarily to a €4.1 million increase in defense investments.


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Editor: Aili Vahtla

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