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Bank of Estonia: Recent tax increases to greatly reduce government deficit

Bank of Estonia chief Madis Müller appearing on 'Esimene stuudio', Wednesday, March 22, 2023.
Bank of Estonia chief Madis Müller appearing on 'Esimene stuudio', Wednesday, March 22, 2023. Source: Priit Mürk/ERR

According to Bank of Estonia (Eesti Pank), the tax reforms adopted by the Riigikogu on Tuesday night will bring sharp improvements to public finances, with next year's budget deficit expected to fall below the EU's 3 percent target. Bank of Estonia chief Madis Müller said, that while Estonia's economic situation may be challenging, it is certainly not a crisis.

According to Bank of Estonia's (Eesti Pank) most recent forecast, which was published on Tuesday, Estonia's fiscal deficit is expected to remain at 3.4 percent of GDP in 2023. The country's central bank then expects this to fall to 1.7 percent next year once the new tax reforms come into force, followed by a further drop to 1.3 percent in 2025.

Bank of Estonia chief Madis Müller stressed in his review, that the central bank had been awaiting the outcome of the Riigikogu's latest session and made the most recent revisions to its forecast in the light of the decisions made.

"Thanks to the tax reforms, it appears that the budget deficit will be significantly lower than this year's level," Müller said.

Commenting on the general state of the Estonian economy, Müller said it was currently mediocre or slightly worse than average. However, at the same time there is no economic crisis.

According to the Ministry of Finance's forecast, which was published in early April, Estonia's budget deficit will rise to €1.7 billion this year, or 4.3 percent of GDP.

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Editor: Michael Cole

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