The government confirmed the 2018-2021 budget strategy in its meeting on Thursday. The new strategy turns away from a balanced budget at any cost and instead plans to make use of the country’s strategic reserve.
The budget strategy sets out the state’s main direction for the coming years and defines the government’s priorities as well as the funding principles for the different ministerial areas. The four priorities, according to the confirmed strategy, are increasing the coherence of the Estonian society, driving economic growth, increasing the Estonian population, and strengthening the country’s security.
Turning away from keeping the budget out of deficit at any cost, for 2018 and 2019 the strategy calls for the use of the strategic reserve resulting from the last years’ budget surplus in the amount of 0.5 percent of GDP for strategic investments. In 2020, this amount is to be reduced to 0.3 percent, and the budget is expected to be balanced again in 2021.
The income tax changes by the coalition of the Center Party, the Social Democrats, and IRL mean significantly lower labor tax revenue. Here, the tax rate will be reduced by 0.74 percent GDP.
Between 2018 and 2021, the public sector will invest €2.3 billion, including an allocation of €315 million to areas that increase Estonia’s competitiveness and defensive capacity, including infrastructure.
To support population growth the parental leave and support system will be changed. Among other things the aim is to better distribute paid parental leave between mothers and fathers to increase parents’ options in the labor market. The government will also continue to raise teachers’ salaries in order to make the profession more attractive.
The health care sector will get an additional €215 million over the next four years, which is aimed at making the financing model of the Estonian health care system sustainable, and improve access to medical services as well as their quality.
The state will continue to spend at least 2 percent of GDP on national defense. In addition the budget will cover the cost of accommodating allied troops, including additional investments in the construction and extension of the Tapa army base. Money will also be invested in the further modernization of the Eastern border.
Based on the budget strategy the 2018 budget bill will be prepared, which the government will pass to the Riigikogu in autumn.
Editor: Dario Cavegn