The State Budget Strategy 2013-2016, approved by the Government today, sets the objective for the next four years to support economic growth and raise competitiveness, to provide people with a greater sense of security and to promote prosperity. The plans for next year include restoring the general government structural budget surplus and gradually increasing it to one per cent of GDP by the year 2016.
Under the 2013 – 2016 State Budget Strategy and the 2012 Stability Programme, the general government structural budget will run a surplus over the entire strategy period. A sustained budget surplus will support economic growth and allow fiscal reserves to be restored.
The general government will reach a nominal surplus in 2014 and it will increase to 0.9 per cent of GDP by 2016. One of the objectives in the State Budget Strategy is to increase the amount of fiscal reserves, to ensure stability in the future. In the event of better than expected economic growth, the Government will direct any revenue windfalls into reserves in order to restore a necessary buffer for the future. The structural position of the budget is the nominal budget position of the government sector less any one-off and economic-cycle effects.
“Over the next few years as well, the state budget will be run at a surplus under normal circumstances, as agreed, and some curbing of forecasts due to deterioration in the external conditions cannot change that attitude. Estonia’s economy is about to achieve the level of growth that it is capable of, and a sustained balanced budget will provide its citizens and businesses with greater confidence and a greater sense of security,” Minister of Finance Jürgen Ligi said.
The economic forecast foresees that the debt burden of the general government sector will grow to 11 per cent of GDP in 2013, primarily due to the effect of the European Financial Stability Facility. In the State Budget Strategy the contributions to the European Stability Mechanism and to Eesti Energia’s share capital are also taken into consideration. The debt burden will then begin to decline and reach 9.5 per cent of GDP by 2016. Under the plan, liquid financial assets will begin growing at the general government sector level from 2016.
The Government will continue structural reforms in order to set expenditures more efficient and in accordance with state opportunities. For example, network of general education schools will be rearranged to provide pupils higher quality education and range of options to choose. In the area of social security, there is a plan to restructure the insurance system against accidents at work and occupational diseases.
For the purposes of the efficient functioning of government sector , there are also plans to continue with the centralised governance of centralising support services, joint procurement and real-estate management and with financial-accounting developments, all contributing to increased efficiency in the future.
When embarking on new activities, Ministries will have to review the funding to date and set priorities in that area. Under the strategy, by 2016 the level of budgetary cost, as a ratio of GDP, will decrease 5.5 percentage points, to 32.2 per cent of GDP, compared to 2011, and the government agencies operational costs, as a proportion of GDP, will decrease by 1.3 percentage points, to 4.3 per cent of GDP.
The broad lines of tax policy will remain the same, and the overall tax burden declining to 32.3 per cent of GDP by 2016, thanks to labour tax cuts. The Government plans to improve tax receipts by improving the collecting of taxes, above all by curbing the proportion of the black economy. In a tax change, the plans include an increase in the alcohol excise duty by 5 per cent per annum over the strategy period. Alcohol is taxed under the principle of raising its excise rate at least at the same rate as the overall increase in prices, so that the relative availability of alcohol does not grow.
The strategy, consolidating fiscal policy objectives for the next four years, together with the stability programme, to be submitted to the European Commission, are part of a new, stronger framework for European cooperation and consistent with the fiscal and economic policy of the euro zone.
The State Budget Strategy constitutes the basis for the 2013 budget. The goal is to ensure sustainable budget policy in an intermediate perspective and to make the government’s activity in the management of the state and the areas of activity more effective.
See Estonian Stability Programme 2012
Source: Estonian Ministry of Finance
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