High prices and high taxes will prolong the economic downturn and make people's lives worse, writes the chairman of "Province" Urmas Reinsalu. :format(webp)/nginx/o/2024/08/12/16286826t1h57ce.jpg)
Urmas Reinsalu. Photo: Martin Pedaja
High prices and high taxes will prolong the economic downturn and make people's lives worse, writes the chairman of "Province" Urmas Reinsalu.
Translation: Pavel Sobolev
Today's summer forecasts from the Ministry of Finance and banks impartially show two things: the government's financial policy will delay the Estonian economy's exit from recession and will further increase prices. The assumptions made in the forecasts directly show the low quality of the government's political decisions.
The instability caused by government policy has significantly worsened our economic prospects this year: after the Finance Ministry’s forecast for 2023 – a 2.7% GDP growth forecast, which formed the basis of this year’s budget – the Finance Ministry now forecasts a 1% decline in GDP. Real GDP is also forecast to fall by 1.2% next year due to the government’s tax policy.
The impact of government policy on price growth has the same negative effect. In the spring forecast of the Ministry of Finance, inflation growth in 2025 was calculated at 2.5%. It has now been adjusted to 5% for next year, mainly due to the already adopted and planned tax increases.
The increase in prices caused by state pressure, combined with the increase in taxes, actually has a negative impact on the purchasing power of the population. In other words: according to the forecast of the Ministry of Finance, the people of Estonia will be steadily poorer next year than they are this year.
The implication of today's forecasts, based on the government's policy choices, is clear: the government must adjust its policies.
