The head of the Estonian Employers' Confederation, Arto Aas, has commented on the Finance Ministry's recently published economic forecast by stating that there is no reason for particular optimism, Delfi Ärileht writes. "Although the published forecasts promise light at the end of the tunnel for the economy, there is no reason for excessive optimism," says Arto Aas, the executive director of the Estonian Employers' Confederation, adding that trust has been lost because they have been hearing the phrase "growth will start in the next quarter" for three years. There is still no growth and the decline continues. According to Aas, the economic recovery will likely be uneven and slower than expected. According to him, the economic situation is still fragile. The Employers' Confederation believes that the government's planned tax increases and additional tax burden will lead to increased inflation and a decrease in economic growth, as well as a decrease in both purchasing power and consumer confidence, which will have a significant impact, for example, on the domestic market. “An especially bad idea is to introduce an advance corporate income tax, which would damage the Estonian tax system, i.e. our current competitive advantage,” admits Aas. The optimism of entrepreneurs regarding foreign markets is also modest, because the most important export markets are in a precarious position – for example, Estonia’s most important partners, Sweden and Finland, and Europe’s largest economy, Germany, are having a hard time recovering. In addition, local exporting companies are finding it difficult to compete in foreign markets, where prices have risen rapidly in recent years. When companies recover, they will not be as competitive as before, and this could slow down export growth. Aas argues that in a country with an open economy, exports are the only thing that brings in money, and therefore they are of decisive importance. Therefore, entrepreneurs continue to expect the state to take action and steps to increase the competitiveness of the economic space so that the Estonian economy can reach a new level: how to stimulate the development of products and services with higher added value, how to conquer new export markets and attract talent and investments. “There is no need to invent answers to these questions, as entrepreneurs have repeatedly made their proposals,” says Aas. This spring, the Estonian Employers’ Confederation together with professional associations presented the economic plan “Ambition is a Choice,” which contains many proposals for both entrepreneurs and the state on how to focus on the current economic development and ensure a new round of development. If the economy grows and develops, tax revenues to the state budget will increase, Aas believes. “Since the state has been living beyond its means for a long time, employers expect a decisive reduction in public sector expenses, not new taxes. “Otherwise, we will get lower economic growth and higher taxes, but society will not become richer,” Aas states. According to the summer economic and financial forecast, the economy will return to growth at the end of 2024. Keeping the budget deficit within 3% will require additional measures. The summer economic and financial forecast contains a baseline scenario and a scenario with sources of coverage under the coalition agreement, the measures of which will be specified during the preparation of the 2025 state budget; they are necessary for balancing the budget and complying with EU requirements. According to the baseline scenario, the economy will return to growth at the end of 2024 due to the recovery of export markets, revival of private consumption and investment. This is encouraged by the gradual increase in confidence among businesses and consumers in both Estonia and its neighbouring countries. The measures planned by the coalition agreement to improve the budget situation, related to measures to increase revenue and reduce expenditure, will have an impact on Estonia’s economic development prospects. The budget cuts and tax changes will limit economic growth somewhat in the short term, but in the long term they will create confidence in the local financial and economic environment. "We will have to raise taxes and make budget cuts in order to improve the state of public finances. The work to improve the sustainability of the state is a burden for the taxpayer, but it is inevitable," said Finance Minister Jürgen Ligi. Under the influence of the planned measures, the economy will grow by 2.1% in 2025 and by 2.7% in 2026. The exact scope of the measures and their details will become clear by the end of September, when the government completes the 2025 state budget and the budget strategy for 2025-2028. "The growth forecast refutes the accusations that government policy is destroying the economy and leading to price increases. We have no alternative to limiting government borrowing and replacing it with spending cuts and tax increases. “Both budget rules and the restoration of economic growth require reductions in budget incentives,” the finance minister said. Read RusDelfi wherever you like. Follow us on Facebook, Telegram, Instagram, and even TikTok.
