Budget, Estonia, Financial Services

The budget's volume of expenses is 11.6 bn euros and the estimated volume of income is 11.8 bn euros.

Compared with this year, expenses are to increase by approximately 240 mln euros, while income is to rise by 760 mln euros. The 2020 budget bill is in a nominal balance, next year's structural deficit will be 0.7 % of the gross domestic product (GDP), while the structural deficit will be 0.2 % in 2021 and the budget is to be in a structural balance from 2022.

The government sector's debt burden is to decrease in both euros as well as a share of GDP. While debt burden was 8.8% of GDP this year, the government sector's debt burden is to be 8% of GDP in 2020. In absolute sums, the government sector's debt burden is to decline from this year's 2.4 bn euros to 2.3 bn euros.

The tax burden will remain stable at 33.2% of GDP in the next two years and is estimated to decline to 32.7% of GDP in 2022.

The average old-age pension is to increase by 45 euros next year. The government allocated 20.8 mln euros for an extraordinary pension hike. Thus, from April 1 of next year, the average old-age pension of a person with a length of service of 44 years can be expected to be 528 euros per month instead of the previous monthly average of 483 euros. Altogether 1.98 bn euros is to be spent on all pension types in 2020.

The budget of the Health Insurance fund is to increase by approximately 140 mln euros in 2020, of which some 115 mln euros is made up of increased receipts of the health insurance portion of social tax. The state budget's appropriation for non-working old-age pensioners is to increase by approximately 25 mln euros.

The financing from the state budget of research and development activity is to increase altogether by nearly 16 mln euros on year in the budgets of ministries. The base financing of research grants and science is to increase by 5.3 mln euros. Altogether 216 mln euros has been earmarked for research in the state budget. The share of research funding is to increase from 0.71% of GDP in the state budget to 0.74% of GDP.

Defense expenses are to rise to 615 mln euros and remain at 2% of GDP, at least. Added to this will be expenses related to accepting allies, which will be approximately 10 mln euros in 2020. Defense expenses will be supplemented by defense investments in the amount of 20 mln euros. 

The government decided to allocate additional funds for increasing the salary funds of teachers, state-paid social workers and employees of the cultural, sports and internal security fields. Altogether 7 mln euros has been planned for increasing the salary fund of internal security workers, while 2.3 mln euros has been earmarked for the salary fund of cultural and sports workers and 1 mln euros for the salary fund of social workers. Additionally, the state is to continue supporting local governments with 15 mln euros so that the average salary of kindergarten teachers would be on the same level as the minimum salary of schoolteachers.

Local government income is to exceed 2.3 bn euros in 2020, which is approximately twice as much as in 2010. Fast income growth has been aided by good tax revenue receipts as well as the state's decision to increase the income tax and equalization fund payments of local governments by an additional 185 mln euros in 2018-2021.

When drawing up the state budget bill, the government was guided by its five priorities -- a family-friendly Estonia, a coherent society, a knowledge-based economy, effective governance, and a free and protected state, government spokespeople said.

The state budget bill is based on the economic forecast of the Ministry of Finance published in mid-September as well as the budgetary strategy for the next four years adopted in spring. The purpose of the budgetary strategy is to plan activities and expenditures for a long term keeping in mind the government's priorities, forecasts, and global trends. 

The state budget, which is drawn up every fall, specifies the activities planned with the four-year strategy for the next year. The revenue collection and expenditure plan is in essence based on programs prepared by ministries.

From 2020, the state will have a new budget structure. Alongside the previous budget, which is described in terms of expenditure, the state budget will henceforth consist of programs led by ministers. This means that the government sets performance targets for the programs and, to achieve them, state authorities are to provide services of agreed quality, volume and cost.