Ligi satisfied despite slowing growth

  • 2012-08-12

TALLINN - Estonian Minister of Finance Jurgen Ligi stated at a government press conference that he was happy to see budget revenue better than initially projected, reports “The tax revenue has exceeded expectations,” said the minister. “This indicates that economic growth was better in the first part of the year than had been predicted, and there was no deterioration in the second quarter,” added Ligi.

He said that the budget has planned for less non-tax revenue. “Social tax and individuals’ income tax have brought in slightly more revenue than expected, but people’s optimism is apparent from the value added tax revenue being higher than projected,” said the minister.

He remarked that in the case of tax revenue, the increase was also due to efforts made for collecting taxes. In terms of spending, Ligi said that while they are lower than planned for in the budget, it cannot be said that the State sector has implemented major austerity measures. “The State’s operating costs have grown, but this is not due to officials earning [higher] wages, but rather, the main factor is the defense spending, which is partially reflected as operating spending,” he explained.

Swedbank Estonia’s macroeconomic analyst Annika Paabut says, however, that data on second-quarter economic growth, estimates which came out on Friday, had been expected to be higher, reports Postimees Online. “We had expected a slightly faster economic growth and probably assessed the domestic economy’s contribution to be higher on the basis of growing numbers of tourists and an improved situation on the labor market,” said Paabut. She empahsized, however, that the Friday statistics as reported by the Statistics Board were flash estimates and if the data would be more detailed, it would also be possible to describe the situation in the economy and potential trends more exactly.

“According to our April outlook, we expect this year’s economic growth to be 2.7 percent,” recalled Paabut. “In the last quarter of the year, we presume that external demand ought to recover somewhat and with the recovering domestic economy, this might push the economic growth faster,” she said.

According to flash estimates, Estonia’s economy grew 2 percent in the year-on-year comparison in the second quarter and 0.4 percent in comparison with the first quarter of 2012.