Estonia’s public debt reached 23.6% in the first quarter of this year, it increased by 6.3 percentage points and was the fastest increase in the European Union (EU), according to Eurostat data, however, it remains one of the lowest in the EU, behind only Bulgaria. In Lithuania, the national debt was 40.1%, in Latvia – 44.5%, EU average – 82.0%. Estonia has identified three priority areas in which government spending has grown significantly in recent years. These are health care, social security and protection. However SEB banks economist Dainis Gašpuitis states that the economic recession has made it difficult to fulfill budget plans, which increases the pressure to search for new sources of revenue and reduce expenses. The budget deficit of the neighboring country was 3.4% last year, and a similar amount is expected this year. In addition, in the next two years the deficit will balance at the maximum permissible limit – 3%. All this shows that the financing of priority goals will continue to raise the national debt.
Estonia’s gross domestic product (GDP) will continue to shrink this year by 0.4%, followed by 1.9% and 3.0% growth next year and 2026, according to the latest forecasts of the Central Bank of Estonia. On the other hand, the estimates of several commercial banks are more skeptical. In addition, the government plans to cut spending by one billion euros over the next four years, as well as increase taxes. A security tax will be introduced (consisting of three taxes for both citizens and companies), which could bring in almost 2.5 billion euros by 2028, according to the forecast of the Estonian Ministry of Finance. Starting July 1, 2025, value added tax (VAT) will increase by two percentage points to 24%. At the beginning of this year, VAT in Estonia was already raised from 20% to 22%.
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2024-09-27 14:55:29