Estonia’s fiscal council urges return to domestic budget rules

Estonia’s fiscal council, which monitors the country’s public finances, says the difficult outlook for state finances has not eased despite economic growth, ERR reported. To reduce the budget deficit, it recommends restoring domestic budget rules from next year after they were suspended.

“To stop debt growth at around 35 percent of GDP, the budget deficit should be reduced by 0.5 percentage points each year,” said Viljar Arakas, deputy chairman of the fiscal council.

He said that if the deficit is planned at 4.5 percent this year, it could be reduced to 4 percent next year, then to 3.5 percent, 3 percent and so on.

“This requires difficult political decisions, but it is the only way to stop debt growth, and it is our most important public-finance objective,” Arakas said.

Fiscal council chairman Peter Lõhmus said there was no basis for expecting rapid economic growth to reduce the budget deficit.

“The Estonian economy is currently operating at the limit of its potential, and expecting faster growth from there will be very difficult without major investments and changes. It is especially difficult in the short term,” Lõhmus said.