The Minister of Finance Sven Sester replied to the interpellation concerning the structural budget balance (No. 280), submitted by members of the Riigikogu Aivar Sõerd, Keit Pentus-Rosimannus and Urve Tiidus on 14 November 2016.
he interpellators referred to the fact that, last week, the European Commission published its autumn forecast which reveals that in their opinion Estonia’s next year’s state budget is in a structural deficit of 0.2 per cent in relation to GDP. In the estimation of the Ministry of Finance which is also the basis for the state budget for 2017 deliberated by the Riigikogu, the budget position is in a surplus of 0.2 per cent of GDP. At the same time, the Fiscal Council operating at Eesti Pank has also reached a result different from that of the Ministry of Finance.
The interpellators wished to know where the difference between the estimates of the structural balance by the European Commission and the Ministry of Finance derived from.
Sester said that there were three reasons behind the difference between the estimates of Estonia’s structural position. The Ministry of Finance assessed the cyclical state of the economy, or the output gap, in 2017 as being more negative. In the estimate of the Ministry of Finance, the output gap is –1 per cent of potential GDP, but in the estimate of the European Commission it is slightly smaller, that is, –0.4 per cent of potential GDP. “We use a uniform methodology but our forecast implies a slightly larger negative output gap,” Sester said. He added that the European Commission does not take into account the one-off factors that we have included in the estimates of the structural position. They are one-off factors, for example, second pillar payments and merger grants in a total amount of 0.4 per cent of GDP. Sester also explained the different forecasts for the nominal budget deficit. According to the state budget for 2017, the deficit will amount to 0.6% of GDP, but it is 0.4% of GDP in the Commission’s forecast. “The small discrepancy is mainly due to the difference in expenditure forecasts,” the Minister of Finance noted.
Sester noted that the state budget for 2017 has been drawn up in accordance with the balance rule of the State Budget Act, that is, at least in a structural balance. The European Commission has also approved Estonia’s draft budgetary plan. The European Commission’s Assessment on the Draft Budgetary Plan of Estonia for 2017 published on 16 November 2016 finds that it is in accordance with the Stability and Growth Pact. “Therefore the Ministry of Finance does not see the need to improve the structural budget position next year. The changes accompanying the new coalition agreement do not change next year’s budget position either; the planned expenditure and reduction of the revenue are fully covered with additional revenue.”
Substitute member Toomas Paur and the Minister of Rural Affairs Tarmo Tamm took their oaths of office before the Riigikogu.
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