Central Bank predicts 2025 budget to be even tighter than next year's

The Bank of Estonia (Eesti Pank) building in Tallinn.
The Bank of Estonia (Eesti Pank) building in Tallinn. Source: Siim Lõvi/ERR

The state budget agreement has been reached, according to Kaja Kallas (Reform), but the budget's revenue and expenditure figures will not be released until Thursday. However, the Bank of Estonia (Eesti Pank) anticipates that the budget for 2025 will be even tighter than next year's.

The ministry of finance told "Aktuaalne kaamera" that the government will discuss the budget agreements at a meeting on Thursday, and that specific figures will be released following that meeting.

"I understand from more recent information that the government did eventually get next year's budget within the parameters it wanted to reach. Questions seem to be more about what will happen in 2025 and beyond. The government is considering not just a one-year horizon, but a longer perspective, and it appears that unless additional cost savings or tax increases are implemented, the situation will only worsen," Madis Müller, the governor of the Bank of Estonia, said.

This is also relevant for the €400 million that will be written into revenue over a number of years without a specific assurance.

"By the middle of next year, we should have a clear understanding of our tax situation in 2025. I think it's fortunate that we now have more time to have this discussion than we would have otherwise," Müller said.

" It seems that a decision has been made where some part of the decision has been postponed. We don't really know what will come of the so-called solidarity tax. It's also a bit of a magician's trick, and I think maybe they're hoping that somehow the economy will get better quicker on its own and then there won't be such a big hole and they won't have to put so much of it in," Urmas Varblane, an economics professor at the University of Tartu and outgoing member of the Fiscal Council, said.

According to Varblane, it is vital to put money into entrepreneurship now.

"In this context, utilizing EU structural funding is a significant challenge. This has been the primary source of investment funds. We have €3.4 billion available between the years of 2021 and 2027, of which only €48 million has been used. This is the place to get a boost for economic development, to get tax revenues and to solve the problems that we have over the four years," Varblane said.

Müller said that there is no significant difference between imposing a separate tax on banks or letting them pay out more dividends and paying more tax on them. "By merely removing some income or profits from the bank, it creates a situation similar to the bank tax, in which banks end up with less capital and, consequently, less ability to lend to businesses and individuals."


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Editor: Barbara Oja, Kristina Kersa

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