• The economic forecast of the Ministry of Finance gives a plausible description of how the Estonian economy will develop in the near future
• The Fiscal Council recommends that a minimum target of structural balance should be set for 2019

The spring 2019 forecast of the Ministry of Finance projects that GDP growth in Estonia will be 3.1% this year and 2.7% in 2020. The forecast indicates the economy will cool from its peak as growth in employment, wages and private consumption will slow. The Fiscal Council finds that the spring forecast is in line with the recent changes that have occurred in the Estonian and global economies.

Some uncertainty is added to the macroeconomic forecast by the difficulties in international trade. The changeover of the budget period of the European Union makes forecasting investment harder. Overall the spring forecast of the Ministry of Finance gives an adequate picture of the outlook for the Estonian economy, and so is a suitable basis to use for preparing the state budget strategy. It will be important to consider in future how the planned changes to the pension system will affect the economy.

The Fiscal Council finds that the forecast for tax revenues in the state budget is in line with the macroeconomic projections. As GDP growth slows, so the period of rapid growth in tax revenues will come to an end. The probability of forecast error is raised, as it was in previous years, for the taxes that are affected by the changes in tax policy.

As the structural deficit was larger than planned in 2018, the State Budget Act requires the general government fiscal position to be improved this year. It is apparent from the fiscal forecast that if the fiscal position is not improved, the budget will be in nominal and structural deficit throughout the forecast period. The Fiscal Council recommends that a minimum target of structural balance should be set for 2019.

The Fiscal Council's opinion and a more thorough explanatory report can be found here.

Additional information:
Raul Eamets
Chairman of Fiscal Council
Tel: +372 514 0082
Email: raul.eamets@ut.ee