The Estonian government at an extraordinary meeting on September 27 approved the 2018 state budget bill, which set out the first ever Estonian state budget to exceed EUR 10 billion.
This marks the first full-length budget of the coalition government that took office in November 2016.
The activities financed from the budget support the four major objectives of the government identified in the budget strategy that the government adopted this spring: to promote economic growth, to increase the population of Estonia, to strengthen Estonia’s security, and to increase the welfare and cohesion of Estonian society, the government communication office said.
With the basic exemption reform, the tax-exempt portion of income for low and medium income earners will increase to EUR 500 per month. This means that people with a gross income of up to EUR 1,200 per month will see up to EUR 64 more net income per month, while the net pay of lower paid employees will increase by up to 15%. The measure is estimated to cost the state EUR 182 million.
The government is planning to invest EUR 56.7 million in important infrastructure projects and in developing the living environment in Estonia. In 2018, the construction of a nationwide broadband network in collaboration with the state, municipalities and the private sector will continue, and construction of the first stage of the Haapsalu railway will begin.
Investments in roads are budgeted to total EUR 227 million, which includes money for the project to transform the Kose-Mao section of the Tallinn-Tartu Highway into a four-lane road, construction of the Juri-Vao section of Tallinn Ring Road into a 2+2 lane road, construction of Reidi Road in Tallinn, renovation of the Haabersti Road intersection in Tallinn and construction of an intersection at Vao on the Tallinna-Narva Highway on the border of the capital city.
Defense expenditures are estimated to equal 2.11% of GDP in 2018. Spending for independent defense capability will equal approximately 2% of GDP, to which investments necessary for hosting NATO allies and costs of the national defense investment program will be added.
Under healthcare financing reform, EUR 300 million of additional money will be channeled into the healthcare system over the next five years, including EUR 34 million in 2018, to improve the availability of services.
In 2018, the state will begin making contributions to the Estonian Health Insurance Fund on behalf of old-age pensioners who are not employed. This contribution is planned to gradually increase to 13% of the average old-age pension by 2022. The Health Insurance Fund, meanwhile, will take responsibility for some of the healthcare services previously financed from the state budget.
The payroll of employees of institutions financed from the state budget will grow by 2.5% and it is up to individual ministries to decide where exactly and how big pay rises will take place. The payroll will increase more – by 4.5% – in the field of interior security, including for the police, rescuers, prison and customs officials and social welfare workers.
Pay increases for teachers will continue, for which purpose the budget of the Ministry of Education and Research will receive EUR 36 million more than this year. The size of the budget of a pay increase for cultural workers and sports coaches working with young people is 10 million euros. A pay increase for prosecutors aimed at ensuring the competitiveness of their salaries will cost 0.6 million euros a year.
According to the bill endorsed by the government, the size of expenditures and investments set out by the budget is EUR 10.58 billion and of income EUR 10.33 billion. Expenditures and investments are bigger by EUR 922 million or by 9.5% and income bigger by EUR 986 million or by 10.6% than this year.
The government decided to reduce the government sector’s structural budget deficit by half compared with what was planned in the national fiscal strategy, to a near-balance level of 0.25% of GDP. (ERR/Business World Magazine)
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