End-August state budget deficit: 1.2 percent of GDP

Money. Source: Siim Lõvi/ERR

The deficit was €474 million at the end of August, or 1.2 percent of anticipated gross domestic product, the Ministry of Finance reported.

The central government's expenditures exceeded receipts at the end of August but local governments and social security funds were in surplus.

As a result of the central government's poor fiscal position the overall deficit increased by €369 million compared to the start of the previous year.

The central government, primarily the state budget, had a deficit of €666 million at the end of August, which was €397 million higher than the same period the previous year. This rise was the result of a combination of slower tax income growth and faster expenditure growth.

In the last eight months, the most significant increases have been in social benefits and finance costs. The central government had a deficit of €47 million in August, owing to an increase in operating expenses and a fall in tax collections.

The social security funds, which include the Health Fund and the Unemployment Fund, had accumulated a €143 million surplus as of the end of August. The Health Insurance Fund saw a fiscal year-on-year rise of €17 million, culminating in a total budget of €122 million. The Unemployment Insurance Fund maintained its previous year's performance by reaching a surplus of €21 million in August. Through the use of unemployment fund reserves, interest revenue of around €13 million at the end of August has prevented a deterioration in the budget position.

By the end of August, the local government surplus had reached €49 million, up €10 million from the previous year. Despite robust personal income tax receipts, the budget position deteriorated in August as a result of higher spending.

August saw an increase of €136.9 million, or 12.6 percent, in the total expenditures of state-funded agencies when compared to August of the prior year, when the total expenditures for the month stood at €1.23 billion.

The biggest increases in expenditure came from domestic subsidies and deferred tax revenues.

Expenditures affecting the state budget increased 14.3 percent year on year in August, reaching €797.6 million. The main reasons for this were increases in social benefits, targeted funding and running expenses.

Foreign funds increased by 19.8 percent, or €20 million, in August compared to the previous year, while investment grants declined by €12.1 million. Foreign funds used to finance state budget agencies' operating expenses have reduced by €19.2 million year on year.

Administrative spending grew by 1.8 percent, or €1.7 million, owing primarily to an increase in defense spending. Lower electricity rates saved the state budget institutions €2.4 million in electricity bills over the course of the year. Spending on medical services declined by €2.4 million in August compared to the same month last year, because last year's expenditure included the purchase of Covid-19 vaccinations and drugs.

Annual labor cost growth was 20.5 percent, owing primarily to a 15 percent increase in the salary bill for teachers, homeland security staff, and cultural workers at the start of the year, and a subsequent 5 percent rise in the wage bill in state-funded institutions.

In August, investment declined by 8.2 percent year on year. Less money was spent on the construction of educational buildings and state-owned roads, as well as the purchase of equipment for educational buildings.

Other operational spending consists mainly of deferred tax revenue, which climbed by 9.4 percent compared to last August, owing to greater personal income tax and social tax payments, as well as increased contributions to financed pension plans.

General balance by subsector: in blue - central government; green - social insurance funds; orange - municipal governments. Source: Ministry of Finance


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Editor: Barbara Oja, Kristina Kersa

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