TALLINN – The Estonian government on Friday agreed about the main points of the fiscal strategy for 2019-2022 that serves as basis for the financial plans for the coming few years, according to which the state budgets of the next four years will be nominally in a surplus position and structurally balanced and there will be no new taxes.
Prime Minister Juri Ratas said that Estonia's economic growth is faster than previously forecast, which in its turn requires a more balanced budget policy.
"Rapid economic growth of course is good news for our residents and businesses, as people have work and wages are growing. For the state, however, this means carefully weighed choices when it comes to investments to avoid overheating of the economy. Also, the decisions made by the government will ensure tax peace in 2019 and we will forgo the increases in the alcohol excise duty planned earlier," the prime minister said in a press release, adding that the fiscal policy of the government will continue to be responsible.
"I wish to thank all ministers and officials for in-depth preparation and businesslike discussions, and I appreciate the team spirit that brought us to the result. The decisions made by the government will ensure tax peace in 2019, a planned surplus in the budget of next year and structural balance," he added.
In the course of the discussions, the government coalition decided to call off the rise in the alcohol excise duty planned for 2019, and to not impose a tax on sweetened beverages, the Government Office said.
"I am glad that we agreed that the budget will be in a balance structurally and in a surplus position nominally. This means that our small government sector debt will decrease further. We are not planning to impose new taxes because the income of the state is growing well already as our economy and wages grow," Finance Minister Toomas Toniste said. "We found possibilities to direct assets set out in the already effective fiscal strategy to cover new costs. In conclusion, these decisions mean that the finances of the state will be in good order also in the next four years," the Pro Patria and Res Publica Union (IRL) minister said.
Minister of Health and Labor Jevgeni Ossinovski highlighted the strong contribution made by the new fiscal strategy to Estonia being a wiser, safer and more just society. "We managed to agree about a historic wage rise in the field of internal security, which will help to preserve the professionalism of our services. In addition, we will make an addition contribution of more than 20 million euros to research and innovation already next year," Ossinovski said.
The chairman of the Social Democratic Party also described as important an investment of more than 100 million euros in the development of e-government services over the next few years. The government will also go on pursuing an earlier priority and will raise the pay of teachers and cultural workers with higher education by 100 euros to 1,250 euros next year. The availability of social and healthcare services will improve significantly, Ossinovski added.
The fiscal strategy builds on the four major objectives set out in the coalition agreement: to promote a sustainable economic environment, to increase the population of Estonia, to strengthen the security of Estonia, and to increase the welfare and cohesion of the society.
Prime Minister Juri Ratas described a decision to finance the Estonian candidacy for a non-permanent seat on the UN Security Council for 2020-2021 as emblematic. In terms of regional policy, additional funding for the program for East-Viru county, initiating a program for Southeast Estonia, renting a fifth ferry, and improving the air connection with Saaremaa are important, he said.
The objective of the government is to support sustainable economic growth. For this the government will postpone some of the planned investments and update the long-term plan for the use of EU funding to redirect support assigned to Estonia in the current multi-annual period in such manner that it could be used more effectively. Cohesion of society will be improved by enlivening the economies of East-Viru county and Southeast Estonia by means of channeling bigger amounts of EU funding and other subsidies there.
In security, the government will continue to contribute at least 2 percent of GDP towards the independent defense capability.
At a Cabinet meeting next week, the government will get an overview of the updated financial plans of individual ministries. The document on the national fiscal strategy will be completed shortly, whereas before its approval the government will hear the opinion of the fiscal council, an independent body. The fiscal strategy document is planned to be endorsed by the government on April 26.