Estonia's 2023 budget deficit at 3 percent

Estonia's 2023 budget deficit at 3 percent. Photo: Sander Ilvest

The actual deficit of Estonia's last year's state budget turned out to be approximately 3 percent, which aligns with earlier forecasts, according to head of the public finances service of the Estonian Ministry of Finance Kadri Klaos.

As of October, the actual budget deficit was 1.5 percent of the annual GDP, and in November, according to the Ministry of Finance, it reached nearly 2 percent, Klaos said at a sitting of the state budget control select committee of the Estonian parliament on Monday.

«This deficit will definitely deepen further in December. And if the forecast was that the annual deficit for 2023 would be -3.3 percent, then we are likely to get close to this 3 percent, as a lot of expenses are accounted for at the end of December,» Klaos said.

The actual revenue for the first ten months of last year was 25 million euros less than the budget's initial projection.

«Up until now, our financials were positive, yet a minor deficit has recently developed,» she said.

With regard to major taxes, the revenue inflow from labor taxes, social tax and personal income tax in the first ten months of last year was larger than a year earlier.

«We still see a strong labor market behind this, which has been much discussed. More specifically, the salary fund, or the average salary, has been growing steadily. As of October, the growth was about 9 percent,» Klaos said.

However, the number of jobs started to decrease.

«The percentage is still small -- it was 0.7 in October, for example -- but the trend has changed,» Klaos said.

Compared to 2022, VAT receipts had decreased as of last October, and the decline continued in the final months of the year.

«Regarding whether the VAT increase prompts people to make purchases in advance, we didn't see a very significant positive change compared to what we forecasted. The increases have been rather modest. It seems there was no big surprise in November either,» she said.

Klaos noted that other types of taxes did not show significant changes, either, with the exception of alcohol excise duty, which saw greater stockpiling in November and December, exceeding the ministry’s forecast by a few million euros.