The Riigikogu heard the report of Eesti Pank

At today’s plenary sitting, Madis Müller presented the 2025 report of Eesti Pank.

In his presentation, the Governor of Eesti Pank Madis Müller introduced the 2025 report, noting that it was his last presentation in the role of Governor. He pointed out that his term in office had been shaped by several major shocks, including the pandemic, the war in Ukraine, and geopolitical tensions. According to Müller, maintaining the stability of the European and Estonian economies during this period required a fast and skilful response on behalf of central banks and governments.

In his presentation, Müller said that the euro area had experienced a rapid price increase in recent years. However, inflation had since declined. “In recent years, we have witnessed an extremely rapid price increase, but we have also seen it subside and price growth slow to the central bank’s 2 percent target,” he said. At the same time, Müller warned that new international crises could once again increase inflationary pressure and required close monitoring.

Describing last year’s decision, Müller said: “Last year, the European Central Bank lowered interest rates on four occasions, and since July 2025 they have remained at around 2 percent.” According to him, these interest rates neither hindered the economy, nor gave it a direct extra boost. He added that the Governing Council of the European Central Bank had recently decided not to change interest rates as developments could still be monitored and new data expected.

Assessing the situation of the Estonian economy, Müller noted that price growth in Estonia had slowed, although it still remained higher than the euro area average. “Last year, the Estonian economy was on a path of recovery, and in annual terms, gross domestic product increased by 0.6 percent in constant prices,” he said. Müller also noted an increase in company sales and the fact that export companies viewed their competitive position as having improved, despite uncertainty in global trade.

Regarding the labour market, Müller said that the situation was better than had been expected. “Companies have done their best to avoid workers’ layoffs even in complicated circumstances,” he said, adding that this had helped maintain incomes and debt-servicing capacity. According to him, low unemployment levels have also contributed to Estonian borrowers generally coping well with their financial obligations.

In the main part of his presentation, Müller focused on public finances and the budget deficit. He stressed that although the increase in defence spending was unavoidable in the current security situation, the budget deficit could not remain permanent. “These higher defence expenditures are not temporary, and the strengthening of national defence is inevitably expensive,” Müller said. He pointed out that there were also other factors worsening the state of the budget, including changes to the tax system and the ageing of the population, which would increase pressure on pension and healthcare spending in the future.

Speaking about the development of public debt, Müller said that although Estonia’s debt burden was still moderate in international comparison, its rapid increase was a cause for concern. “Public debt needed to finance the deficit would double from 10 billion euros in 2025 to nearly 21 billion euros,” he said. Müller warned that rising interest costs would limit the state’s budgetary room in the future and could make borrowing more expensive also for the private sector.

Müller called on politicians to reach a broader agreement on the management of public finances. “Let us try to reach in Estonia a cross-party understanding and agreement that would help us move towards reducing the deficit and slowing down the growth of debt,” Müller said. In his view, the long-term direction of public finances requires clarity and consistency in order to increase the confidence among both enterprises and investors.

When discussing the activities of Eesti Pank, Müller explained that, in addition to economic outlooks, the central bank also constantly assessed risks in the financial system. He said: “Last year, the most significant risks threatening the Estonian financial system were the rapid growth of bank lending and the increasing share of foreign funding in banks, against the backdrop of the changing geopolitical situation.”

According to Müller, despite uncertainty, the availability of loans remained at a good level, and therefore Eesti Pank decided to maintain the countercyclical capital buffer requirement, which helped strengthen the resilience of banks. Müller also presented measures to increase competition in the mortgage market, noting that several proposals by Eesti Pank had already entered into force or would soon enter into force. As regards the developments related to the digital euro, Müller said that Eesti Pank saw its main added value in improved resilience of payment services in crisis situations, stressing that the digital euro did not mean the disappearance of cash.

Diana Ingerainen from Estonia 200 Parliamentary Group, Riina Sikkut from the Social Democratic Party Group, Urmas Reinsalu from Isamaa Parliamentary Group, and Mart Võrklaev from the Reform Party Parliamentary Group took the floor during the debate.

Verbatim record of the sitting (in Estonian)

Photos (Erik Peinar, Chancellery of the Riigikogu)

Video recording will be available on the Riigikogu YouTube channel.

Riigikogu Press Service
Maiki Vaikla
+372 631 6456, +372 5666 9508
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