The Finance Committee has received an overview of the summer economic forecast, the Riigikogu press service reported on Thursday. "Purchasing power in Estonia has dropped to the level it was at during the Taavi Rõivas government," said Andrei Korobeinik, Deputy Chairman of the Finance Committee of the Riigikogu. "This means that in terms of living standards, we have rolled back seven years." :format(webp)/nginx/o/2024/07/09/16211146t1he9d9.jpg)
Estonia's state budget deficit. Photo: Karl-josef hildenbrand
The Finance Committee has received an overview of the summer economic forecast, the Riigikogu press service reported on Thursday. "Purchasing power in Estonia has dropped to the level it was at during the Taavi Rõivas government," said Andrei Korobeinik, Deputy Chairman of the Finance Committee of the Riigikogu. "This means that in terms of living standards, we have rolled back seven years."
On Thursday, the Finance Committee of the Riigikogu was presented with an overview of the summer economic and financial forecast of the Ministry of Finance, which will form the basis for drafting both the draft law on the state budget for next year and the state budget strategy for the next four years.
According to the chairperson of the finance commission, Anneli Ackermann, the new forecast will set the direction for drafting the state budget law for next year and the state budget strategy.
According to her, the most important topics in the coming years will be the budget deficit and its reduction. Thus, in the coming years, the shortage of funds will affect both government spending and investments. "The vehicle tax, which will be introduced next year, will reduce the budget deficit to a noticeable, but not sufficient extent," she said.
Ackermann noted that social spending is growing faster than the economy, as the number of pensioners is increasing, and indexation entails an increase in pensions. "To cover fixed costs, we also need fixed income from taxes, because pensions are low – the average pension is less than half the average salary, and this ratio should not decrease," she noted, adding that the only option is to find additional fixed income for the state.
Deputy Chairman of the Committee Andrei Korobeynik noted that high inflation has led to a decline in the real standard of living in Estonia. "Even if the economy grows by, for example, 0.5% next year, the purchasing power of the population will still be low. Currently, purchasing power in Estonia has dropped to the level it was at during the government of Taavi Rõivas. This means that in terms of the standard of living, we have rolled back seven years," he said.
According to Korobeynik, the most significant problem with Estonia's economic policy is the lack of confidence in the government's actions and the lack of a clear strategy for economic growth.
"For the second year in a row, Estonia has been the European Union's worst performing economy. This year, Estonia is the only country in Europe whose economy is shrinking, while all other countries, including Ukraine and Russia, are growing. This is because the government is taking money from the most vulnerable people – pensioners, rural residents and large families – instead of imposing a tax on banks' excess profits or introducing a progressive income tax," he added.
Finance Minister Jürgen Ligi and representatives of the Ministry of Finance presented an overview of the summer economic and financial forecast at an extraordinary meeting of the Finance Committee.
The government must approve the budget strategy for the next four years, approve the draft law on the state budget for next year and submit them to the Riigikogu no later than the end of September.
