The government on September 29 agreed on the state budget for 2021 with expenditures amounting to approximately EUR 13 billion and revenues at over EUR 11 billion. Funding for research will increase to 1% of GDP and pensions will rise.
Prime Minister Juri Ratas (Center) said the purpose of the budget was to accelerate economic development, maintain healthcare and support those in need in the coronavirus crisis.
Investments by the government sector will amount to EUR 1.9 billion euros next year. The country will bring in EUR 1.4 billion in external funding and it plans to borrow EUR 2.4 billion.
The nominal deficit of the budget will equal 6.7% of GDP and the structural deficit 6.6% of GDP next year.
The budget bill will be submitted to the Riigikogu on September 30. The government also endorsed the state’s budgetary strategy for the next four years.
Ratas said the country planned to use the funds of the next budget period of the European Union as soon as possible, as well as the funds from the restart plan.
With the support of the European Union, the government wants to invest in health infrastructure and renovate several hospitals and medical centers. It is also planned to ensure the security of supply for crisis preparedness.
Research funding will rise to 1% of GDP next year and will remain there for the four-year budgetary strategy period. EUR 7.8 million will be directed to the financing of higher education.
Finance Minister Martin Helme (EKRE) said the amount earmarked for research and development next year would grow by EUR 56 million, to EUR 280 million. Funding for the sector under this year’s state budget was 0.75% of GDP.
The state will spend an additional EUR 66 million on defense expenditure over the next four years and will focus on increasing coastal protection capacity.
The construction of four lane highways is being prioritized.
Almost EUR 50 million will be used to increase pensions, which will increase by an average of EUR 20 in 2021.
Reorganization of the hospital network is to cost EUR 545 million in total over the coming years.
Tax revenue will increase to EUR 9.3 billion next year compared to EUR 9 billion this year. The tax burden will fall to 32.7% of GDP next year, compared to 33.8% in 2020.
According to the plan, the government sector’s structural deficit will contract to 4.9% of GDP and nominal deficit to 5.4% of GDP in 2022. In 2023, the structural deficit is estimated to equal 3.3% and the nominal deficit 4.3% of GDP, while in 2024 the structural deficit would be 1.3% and the nominal deficit 2.5% of GDP.
The government sector’s debt burden will grow but will continue to be the lowest in the EU in 2021. The budget deficit that emerged as a result of the crisis, as well as the measures to enliven the economy are to be financed by means of issuing bonds and borrowing.
In 2021, the government sector’s debt burden will be EUR 6.6 billion or 23.6% of GDP. According to the forecast, the state treasury will assume EUR 2.3 billion in additional liabilities in the form of borrowings and loans in 2021.
This autumn, both the draft state budget for next year and the budget strategy for the next four years are being prepared at the same time. The goal of the budget strategy is to plan activities and money over the longer term, keeping in mind the government’s priorities, future forecasts and global trends.
The government usually endorses the budgetary strategy in the spring. However, an amendment made to the State Budget Act enables the government to postpone the endorsement of the budgetary strategy until the end of September due to the emergency situation declared in spring of this year.
The state budget reflects specific expenditures and revenues for the next year.
The base amount of pension will increase by EUR 16 and the pension supplement for raising children will be increased to a yearly rate of 1.5, which adds another EUR 3.5 per child to a parent, spokespeople for the Ministry of Social Affairs has said.
The national pension will grow by EUR 30, to EUR 251.61. The total sum to be allocated for next year’s pension hike amounts to EUR 49.4 million.
The increase in the additional pension supplement will grant extra income for pensioners who have raised one or more children born before January 1, 2013, for at least eight years. The pension supplement is paid to some 203,000 pensioners for altogether 429,000 children – on average for two children per pension recipient.
A pensioner with an average number of years of pensionable service who has raised two children receives a pension of EUR 528 and close to EUR 46 in supplements, bringing the total pension to EUR 571. From April 1, 2021, this person will see their total pension grow by EUR 23 euros, to EUR 594.
The pension supplement for raising children is only paid to one parent or split between parents upon a corresponding agreement between them.
Those entitled to receive the national pension are people who have attained the pensionable age but do not have the pension qualifying period required for the old-age pension and have lived in Estonia for at least five years preceding the pension application. Such pension recipients number close to 3,000 in Estonia.
The minimum means of subsistence in Estonia in 2020 is EUR 221.36.
The share of people aged 65 and over living in relative poverty in Estonia has been the highest in the European Union over the past years. According to data by Eurostat, 46.3% of the elderly in Estonia lived in relative poverty in 2018.
Meanwhile, Estonia’s expenditure on the old-age pension of its citizens is among the lowest in Europe. The average old-age pension accounted for 42% of the average monthly net salary in Estonia in 2019. Said figure is the lowest among EU member states. (ERR/Business World Magazine)
