State budget boosts health fund, R&D and defense ({{contentCtrl.commentsTotal}})

Prime minister Jüri Ratas (Centre) announcing the coalition approval of the state budget on Tuesday.
Prime minister Jüri Ratas (Centre) announcing the coalition approval of the state budget on Tuesday. Source: Ken Mürk/ERR

The state budget unveiled by the coalition government on Tuesday will see increases in the health insurance fund, research and development (R&D) spend, defense spending and other areas, according to a government press release.

The following increases will be made, according to a government press release:

  • Health Insurance Fund (Haigekassa) will increase by close to €140 million, chiefly from increased social tax receipts.
  • R&D spend will increase by nearly €16 million, with a planned total contribution of €216 million. As a share of GDP, R&D spend will increase to 0.74 percent from 0.71 percent.
  • Defense spend will increase to €615 million, exceeding the 2 percent GDP stipulated by NATO. €10 million of this goes towards hosting Estonia's NATO allies.
  • Internal security employees will see a €7 million increase towards salary funds.
  • €15 million will be spent on the state to keep kindergarten teachers' average wages inline with their elementary and secondary school counterparts.
  • One to two million euros are also allocated to social worker, culture and sports workers.
  • Local government revenues are predicted to grow by more than €2.3 billion in 2020, nearly double what they were 10 years before.

Pensions

While the government says the average old-age pension will increase by €45 per month, the extraordinary pensions increase which was often associated with the switching of the second pillar pension fund to a voluntary basis will be €7, not €100 as promised by the party before the election in March, social affairs minister Tanel Kiik said Tuesday.

The government says this is nevertheless the largest increase in 12 years, with €20.8 million earmarked for an extraordinary pensions hike. This means the average old-age pension for a person with 44-years service to their name will rise from €483 to €528 per month. The government's total pension expenditure will be 1.98 billion euros in 2020.

Budget balance, debt and tax burden

The government says the draft budget for 2020 is in nominal balance and moving structurally towards a balance, with a structural deficit of 0.7 per cent of GDP. In 2021, the structural deficit will decline to 0.2 per cent and the budget is forecast to be in a nominal surplus, according to the press release.

General government debt is set also to decrease, both in euros and as a share of GDP. General government debt will decrease to 8 per cent of GDP in 2020 from 8.8 per cent in 2019. In absolute terms, government debt will decrease to €2.3 billion in 2020 from €2.4 billion this year, the government says.

The tax burden will remain stable at 33.2 per cent of GDP over the next two years and is projected to fall to 32.7 per cent of the GDP in 2022, the government says.

The government approved the draft state budget for 2020 on Tuesday, with expenditures at €11.6 billion euros and revenues at €11.8 billion euros. Expenditures will increase by approximately €240 million and revenues by e760 million on 2019, the government said.

The government presented the budget to the Riigikogu on Wednesday.

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Editor: Andrew Whyte

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