TALLINN – Finance Minister Mart Vorklaev said on Tuesday that Estonia will not achieve budget balance with solid economic growth alone, because a growing economy also brings with it growing costs.
"The required leap in gross domestic product is too great for such an improvement in the budget from mere economic growth to be real. So climbing out of the big financial hole requires tough decisions and increased revenue," the Reform Party minister said.
The government on Tuesday approved the 2024 state budget and the state budget strategy for the next four years with next year's revenues amounting to 16.8 billion euros and expenditures to 17.7 billion euros. Compared to the budget for 2023, revenues will increase by 7.7 percent and expenditures by 4.9 percent.
The structural deficit in the 2024 budget remains unchanged from 2023 at 1.2 percent of GDP and the nominal deficit is 2.9 percent of GDP.
According to the minister of finance, next year's budget will improve the state of the public purse by roughly 500 million euros.
"In the future, that is from 2025, we plan to keep the structural position at -1 percent of GDP or better," Vorklaev said.
Additional income from the tax changes that have already entered into force will total nearly 800 million euros over the next four years, of which some 300 million euros will already be reflected in next year's budget, when the VAT will rise from the current 20 percent to 22 percent. At the same time, 1.9 billion euros will be channeled into the economy as investments and investment subsidies next year.