Fiscal Council: 2025 budget deficit too high
According to the Estonian Fiscal Council, an independent body operating under the Bank of Estonia, the state budget strategy approved by the government does not comply with Estonia's budgetary rules, as the planned deficit is excessively high.
The government intends to keep the nominal budget deficit close to 3 percent of GDP in the coming years. However, the reduction of the deficit has been delayed compared to previous plans.
According to a statement from the Estonian Fiscal Council, this budgetary trajectory does not comply with domestic fiscal rules, which do not permit the planning of a structural deficit greater than 1 percent of GDP. Based on the Ministry of Finance's assessment, the structural deficit under the budget strategy would only fall below this limit in 2025, but not thereafter.
As a result, the Fiscal Council notes that the goals set in the state budget strategy for 2026-2028 do not meet the requirements of Estonia's domestic fiscal rules. To comply with these rules, the budget position during this period would need to be improved by approximately €1 billion.
The Fiscal Council would not support further easing of domestic fiscal rules. Given Estonia's small and open economy, it is justified for these rules to be stricter than those of the European Union.
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Editor: Huko Aaspõllu, Marcus Turovski
