The Estonian government at an extraordinary meeting on Wednesday approved the 2018 state budget bill, which set out the first ever Estonian state budget to exceed €10 billion.
This marks the first full-length budget of the coalition government that took office in November 2016.
The activities financed from the budget support the four major objectives of the government identified in the budget strategy that the government adopted this spring: to promote economic growth, to increase the population of Estonia, to strengthen Estonia's security, and to increase the welfare and cohesion of Estonian society, the government communication office said.
With the basic exemption reform, the tax-exempt portion of income for low and medium income earners will increase to €500 per month. This means that people with a gross monthly income of up to €1,200 will see up to €64 more net income per month, while the net pay of lower paid employees will increase by up to 15 percent. The measure is estimated to cost the state €182 million.
The government is planning to invest €56.7 million in important infrastructure projects and in developing the living environment in Estonia. In 2018, the construction of a nationwide broadband network in collaboration with the state, municipalities and the private sector will continue, and construction of the first stage of the Haapsalu railway will begin.
Investments in roads are budgeted to total €227 million, which includes money for the project to transform the Kose-Mäo section of the Tallinn-Tartu Highway into a four-lane road, construction of the Jüri-Vao section of Tallinn Ring Road into a 2+2 lane road, construction of Reidi Road in Tallinn, renovation of the Haabersti Road intersection in Tallinn and construction of an intersection at Vao on the Tallinna-Narva Highway on the border of the capital city.
Defense expenditures are estimated to equal 2.11 percent of GDP in 2018. Spending for independent defense capability will equal approximately two percent of GDP, to which investments necessary for hosting NATO allies and costs of the national defense investment program will be added.
Under healthcare financing reform, €300 million of additional money will be channeled into the healthcare system over the next five years, including €34 million in 2018, to improve the availability of services.
In 2018, the state will begin making contributions to the Estonian Health Insurance Fund on behalf old-age pensioners who are not employed. This contribution is planned to gradually increase to 13 percent of the average old-age pension by 2022. The Health Insurance Fund, meanwhile, will take responsibility for some of the healthcare services previously financed from the state budget.
The payroll of employees of institutions financed from the state budget will grow by 2.5 percent, and it will be up to individual ministries to decide where exactly and how large of pay raises will take place. The payroll will increase by 4.5 percent in the field of interior security, including for the police, rescuers, prison and customs officials as well as social workers.
Pay increases for teachers will continue, for which the budget of the Ministry of Education and Research will receive €36 million more than this year. Another €10 million has been earmarked pay increases for cultural workers and sports coaches working with youth. A pay increase for prosecutors aimed at ensuring the competitiveness of their salaries will cost €600,000 per year.
According to the bill endorsed by the government on Wednesday, the size of expenditures and investments set out by the budget is €10.58 billion and of income, €10.33 billion. Expenditures and investments will increase by 9.5 percent, or €922 million, while income will increase by 10.6 percent, or €986 million.
The government also decided to reduce the government sector's structural budget deficit by half compared with what was planned in the national fiscal strategy, to a near-balance level of 0.25 percent of GDP.
Editor: Aili Vahtla