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The Fiscal Council does not endorse the summer economic forecast of the Ministry of Finance September 06, 2022

The Fiscal Council does not endorse the summer economic forecast 2022 of the Ministry of Finance as it uses out-of-date assumptions about the growth in government spending. The Fiscal Council recommends that the state budget strategy 2023‒2026 should also include an updated macroeconomic forecast.

The forecast for general government consumption and wage costs used in preparing the summer forecast dates from the state budget strategy produced a year and a half ago, and the forecast assumptions in it are out of date because of high inflation. Neither did the summer forecast take account of the spending measures planned by the new governing coalition, which were announced in July.

The summer forecast of the Ministry of Finance consequently underestimates substantially the amount of general government spending, the budget deficits and the debt levels for 2023‒2026, and this then affects the other economic indicators that are forecast.

The Fiscal Council considers it important that the state budget strategy 2023‒2026 that will be composed by the end of September contain an updated macroeconomic forecast by the Ministry of Finance that uses the most recent information on the budget measures planned by the new government coalition, and an updated estimate of the development of general government wage costs, consumption and investment.

The Fiscal Council recommends that future forecasts of the Ministry of Finance should contain two scenarios, one based only on budgetary measures that are already legislated, and a second that the ministry estimates to be the most probable scenario for the state finances.

Additional information:
Raul Eamets
Chairman of Fiscal Council
Tel: +372 514 0082
Email: raul.eamets@ut.ee