The Commission prepared a report under Article 126(3) of the Treaty on the Functioning of the European Union for 12 member states, including Estonia, to assess their compliance with the deficit criterion set out in the Treaty. Based on this assessment and the opinion of the Economic and Financial Committee, the Commission does not find it necessary to initiate an excessive deficit procedure against Estonia," stated the decision conveyed by the Commission's press service.

According to the European Union's budgetary rules, a member state's budget deficit must not exceed 3 percent of its gross domestic product (GDP). If this threshold is exceeded, the country may face an excessive deficit procedure, which in its final stage could result in fines for the offending country.

However, the European Commission presented Estonia with a series of recommendations, the first of which highlighted the need to limit the growth of total expenditures in a way that would bring the government sector's budget deficit below 3 percent of GDP.

The Commission also believes that Estonia should broaden its tax base and improve funding and access to healthcare and social services. Additionally, it recommends that Estonia continue to reduce the share of oil shale in its energy sector while enhancing resource productivity through innovation. Attention is also recommended for high-quality labor, including retraining and upskilling, to increase labor productivity.

"Estonia should continue implementing its national recovery plan and reduce the share of oil shale in its energy mix while improving resource productivity through innovation. Today's recommendations urge Estonia to better address the needs of the long-term care sector and strengthen social protection, particularly tackling elderly poverty and expanding unemployment benefits coverage. Estonia should enhance its labor productivity and skills supply through retraining, skills upgrading and better attracting talent. In terms of budgetary policy, Estonia should limit expenditure growth in 2025 to ensure the budget deficit remains below 3 percent of GDP and maintain conservative public sector debt levels," said European Commission Vice-President Valdis Dombrovskis in a press release.

The Commission's country reports provide an analysis of the economic, employment and social developments of member states, and summarize the implementation of recovery and resilience plans and cohesion policy programs.

Overall, the Commission notes that the European Union has managed to withstand significant economic and social shocks, such as the COVID-19 pandemic, Russia's war of aggression against Ukraine, the resulting rise in energy prices and high inflation. According to the Spring 2024 economic forecast, GDP is expected to grow by 1.0 percent in the EU and 0.8 percent in the euro area in 2024, driven by a strong labor market and dynamic private consumption. Economic growth is projected to accelerate to 1.6 percent in the EU and 1.4 percent in the euro area in 2025. At the same time, inflation is expected to decrease from 6.4 percent in 2023 to 2.2 percent in 2025.

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