The state budget strategy and the targets in it for the structural fiscal position are based on the spring forecast of the Ministry of Finance. In its opinion on the 2016 spring forecast, the Fiscal Council concluded that the forecast used quite optimistic assumptions about growth in external demand and prices and it is probable that tax revenues will be lower than forecast. It is also possible that the potential output level of the Estonian economy may be overestimated for this year and next, and that this may affect the structural fiscal position. For these reasons the structural fiscal position of the general government may prove to be weaker than forecast.

Despite slow economic growth in recent years, wage costs and private consumption have risen fast and tax revenues have been good. Alternative methods for assessing structural balance consequently indicate that it is possible that the structural budget position may be in deficit. Given the uncertainty about the position of the economic cycle and the assessment of the structural fiscal position, it is reasonable to aim to have some space when achieving structural balance.

The Fiscal Council opinion and a more thorough explanatory report can be found here: Opinion Targets Structural 2017-2020.pdf

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

Background Information

Each spring the state budget strategy is reviewed and targets for the structural fiscal position of the general government for each of the next four years are presented. Under the State Budget Act, the Fiscal Council gives its opinion on the targets for the structural budget position before the state budget strategy and the stability programme are approved, looking at the budget rules and the need to adjust the structural budget position.