Estonia’s general government budget deficit stood at EUR 342 million as of the end of August, the Ministry of Finance has said.
This represented 0.8% of expected annual GDP – a fall of EUR 207 million.
As of the end of August, central government – meaning mainly the state budget – had a deficit of EUR 381 million. The position, which had shown a surplus in January thanks to an extraordinary inflow of corporate income tax, transformed into a deficit in March following income tax refunds and deepened slightly further in August. However, this year’s deficit is EUR 231 million less than that seen in the same period last year, Helin Kutt, analyst at the Ministry of Finance’s fiscal policy department said.
Tax revenues in August exceeded the levels expected both in the state budget and in the fresh economic forecast. Over the first eight months of 2025 as a whole, tax revenue collection also surpassed budgetary expectations, mainly thanks to personal and corporate income taxes, Kutt added. Non-tax revenues similarly exceeded last year’s levels, driven by a growth in foreign aid and in the sale of goods and services, which was partly due to the introduction of the motor vehicle tax.
As to social insurance funds, these ended up in August with a deficit of EUR 35 million, most of which – EUR 48 million – derived from the Health Insurance Fund. The deficit tallies with the summer economic forecast, which projects an overall shortfall of nearly EUR 122 million until year-end, the result of a rapid rise in healthcare workers’ wages, increased demand for medical services, and the public expectation that waiting lists should not get any longer, Kutt explained.
The Unemployment Insurance Fund meanwhile posted a surplus of EUR 14 million until the end of August, after a small deficit earlier in the year. Its budget position is expected to hold steady, with the summer forecast anticipating a balanced outcome until year’s end.
The labor market situation remains satisfactory, the ministry said. The registered unemployment stood at 6.3% in August, compared with 6.9% a year earlier. Unemployment is also lower than during the same period over each of the past three years. Local governments’ budgetary positions meanwhile demonstrated a surplus of EUR 74 million by the end of August, exceeding last year’s level by EUR 35 million. The position weakened somewhat in August itself, however, due to faster growth in expenditures.
The total volume of state budget expenditures rose by 10.3% YoY in August, primarily the result of increased investments and operating costs, Kutt said. The total expenditure by state budget institutions reached EUR 1.41 billion in August, up by EUR 131.9 million, or 10.3%, compared with August last year.
Expenditures affecting the budgetary position – that is, those excluding foreign funds and redistributed tax revenues – rose by EUR 103.7 million, bringing total spending for August to EUR 914.3 million. Cumulatively, these types of expenditures amounted to EUR 7.794 billion as of the end of August.
State institutions distributed EUR 1.6 million more in domestic grants in August than in the same month in 2024. Social benefits rose by EUR 14.5 million during that time, EUR 13.5 million of which derived from old-age pensions.
Foreign grants channeled through the budget came to EUR 24.4 million more than a year earlier. State institutions spent EUR 126.3 million on labor costs in August, an annual growth rate of 5.5%. The rise in wage costs was driven in August by the defense sector and higher payouts of special pensions.
Operating expenses rose by EUR 32.1 million in August, due to defense-related spending and the VAT hike. Over the first eight months of 2025, the use of defense-related funds stood at EUR 32.2 million more than it was in the same period last year.
The volume of investments grew by EUR 48.9 million in August, including EUR 41.4 million more investment in the defense sector compared with the case a year earlier. Over the first eight months, total investment reached EUR 165.6 million more than last year, the majority of which – EUR 152.1 million – was allocated towards defense. Spending on internal security has also risen.
Redistributed tax revenues grew by EUR 26 million, or 6.7%, mainly due to higher personal income tax receipts, health insurance social tax, and contributions channeled into pension funds. (ERR)