The summer 2023 forecast of the Ministry of Finance shows that weak foreign demand has pushed the recovery in economic growth in Estonia back from the second half of 2023 to 2024.

The Fiscal Council endorses the economic forecast of the Ministry of Finance, but emphasises the uncertainty there has been around forecasts for economic growth and inflation in recent years. Forecast errors for tax receipts could also prove larger than usual because a lot of changes to the tax system have come into force all at once.

Stronger tax revenues mean the budget deficit in 2023 and 2024 is smaller in the fiscal forecast than it was in the spring, but the longer-term outlook for state finances remains challenging as the coalition agreement contains not only tax rises, but also measures that will reduce state revenues and increase state spending.

The Fiscal Council finds that the summer forecast of the Ministry of Finance is a suitable basis for drafting the state budget 2024 and the budget strategy for the next four years. The government must consider when setting the budgetary targets for the years ahead that the fiscal rules will require the nominal deficit to be held under 3% of GDP, and for there to be improvement towards structural budget balance.

The Fiscal Council's opinion and a more thorough explanatory report can be found here.