The committees of the Riigikogu discussed Estonia’s economic situation and economic policy measures with IMF representatives
At today’s meeting of the members of the Finance Committee and the Economic Affairs Committee of the Riigikogu (Parliament of Estonia) and the delegation of the International Monetary Fund (IMF), the state of Estonia’s finances and economy, as well as necessary economic policy measures were discussed.
Members of the Riigikogu committees gave an overview of factors affecting the state budget, tax changes, the economic situation, and ensuring energy security.
Among other things, the IMF delegation was interested in the development of Estonia’s tax system to assess how it could better support budget sustainability. Reforms to improve competitiveness were also discussed, including strengthening the investment environment, opportunities for using of artificial intelligence, and labour market policy. Special attention was given to energy policy and the impact of electricity price fluctuations on competitiveness.
Chair of the Finance Committee Annely Akkermann explained the situation regarding the sustainability of Estonia’s state budget.
“Due to the rapid growth in defence spending and changes in income tax, the general government deficit has risen to 4.5 percent, which will decrease gradually in the coming years and reach 2.8 percent of GDP by 2029. The goal for the coming years is to reduce the budget deficit,” Akkermann said. She pointed out that after the cancellation of a two-percentage-point income tax increase, Estonia’s tax burden fell from 36.6 percent to 35.2 percent. The national debt burden grew by EUR 1.7 billion, to 25.9 percent of GDP. The national debt burden will increase because of all the additional costs, and is predicted to reach 31.4 percent of GDP in 2029, and the interest costs will amount to 0.8 percent of the GDP, or EUR 417 million. High inflation has slowed down and currently stands at 4 percent.
According to Chairman of the Economic Affairs Committee Marek Reinaas, the meeting provided a useful comparative overview of the economic situation in neighbouring countries. He noted that the Estonian economy was on the rise, which was evidenced by 2.4 percent economic growth. “To support a technology-intensive growth cycle in Estonia’s economy, we are creating an attractive investment environment, a supply of clean energy, and diverse access to capital for businesses that meet the economy’s changing needs,” Reinaas explained. To resolve energy-related challenges and achieve more affordable electricity prices, it is necessary to invest in the construction of wind farms to ensure that 70 percent of the energy portfolio consists of non-dispatchable green energy.
Chair Annely Akkermann, Deputy Chair Andrei Korobeinik, and members Aivar Sõerd, Mart Võrklaev and Riina Sikkut from the Finance Committee, and Chairman Marek Reinaas and member Urve Tiidus from the Economic Affairs Committee participated in the meeting with the IMF delegation.
During its visit, the IMF delegation will get an overview of the current state and prospects of Estonia’s financial sector, as well as changes in anti-money laundering policy and practices. As in previous years, the focus is on the readiness of Estonia’s financial supervisory authorities to take additional steps to ensure financial stability if it should prove to be necessary.
The delegation of the International Monetary Fund (IMF), which is visiting Estonia until 9 June, will discuss Estonia’s economic situation and necessary economic policy measures with representatives of the public and private sectors. The visit takes place in the framework of the IMF’s annual economic policy consultations.
The IMF delegation will meet with members of the Government and the Riigikogu, as well as with leaders and analysts from Eesti Pank (Bank of Estonia), and representatives of ministries, local governments, government agencies, and the Financial Supervision Authority. They have also planned to have meetings with the representatives of commercial banks, professional organisations and private businesses.
Head of the IMF delegation Vincenzo Guzzo will present the conclusions of the visit at the press conference on Tuesday, 9 June at 11 a.m. The Minister of Finance and the Governor of the Bank of Estonia will also give comments at the press conference.
The IMF discusses important economic policy issues with all member states. The outcome of the consultation is a public report reflecting the IMF experts’ assessment of Estonia’s economic policy.
Photos (Erik Peinar, Chancellery of the Riigikogu)
Riigikogu Press Service
Gunnar Paal
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