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Time is short, sums are considerable and promises need fulfilling. That is the situation in which the government needs to find a way to patch a €50-million hole in the state budget in under four months. Another €50 million needs to be cut to maintain fiscal balance next year.
Member of the Riigikogu Finance Committee Aivar Sõerd (Reform Party) finds that to be just the tip of the iceberg. “We need to take a closer look at these figures, at how this alleged equilibrium over the coming years has been achieved. I do not trust these numbers.”
Minister of Finance Mart Helme, who presented the ministry’s economic forecast yesterday, does not deem it impossible to find €50 million in four months. “We have leeway here, but the question remains whether we really want to save the money or whether we want to make the situation look good,” Helme said.
The minister did not mention specific fields that could be looking at cuts but said potential avenues discussed covered activities and support instruments. The minister pointed to the possibility of finding saving in ministries that has been talked about since spring and mentioned a planned state budget revision that should go over support measures, irrational investments and duplication of tasks. Helme did not wish to give specific examples. “Doing so would probably be unfair toward someone,” he said.
Helme went into more detail concerning possibilities to embellish the fiscal position. “For example, we can postpone the completion of a section of the Tallinn-Tartu highway from December to January. That would save us €30-40 million in December, with the expense registering in the budget in January,” he said. This would constitute postponing this year’s obligation to the next and would require €100 million to be cut in 2020.
Budget deliberations will involve the Center Party’s promise of an extraordinary pensions hike, even if it will only amount to €10-15 on top of a €40 hike from standard indexation next year. “It is something we will seriously consider,” Martin Helme said.
The €50-million deficit was found after GDP figures were revised and those for 2018 and 2019 changed in the summer forecast. Because the annual adjustment does not exceed 0.5 percent of GDP, a part of the major deficit from 2018 was moved to this year, creating the need to save €50 million from the current budget.
Aivar Sõerd said that while cutting €50 million is no insurmountable task, the sum itself raises questions. “Those €50 million need to be taken with a grain of salt as there is a lot of hot air in this budget,” he said, suggesting the actual deficit and need to cut might be far greater. He also promised to keep an eye on the finer details of the budget as a representative of the opposition leader. Sõerd said the government is living beyond its means, which is why it needs to cut costs, and that instead of pondering borrowing, the government should think about setting aside reserves and major investments. Looking at struggling growth, leaner times should be given thought. “It’s a question of whether they want to spend the money to fulfill election promises or think about the future and invest in long-term projects, such as road construction. A matter of priorities,” he said.
The finance ministry’s forecast found a €50-million hole in the 2019 budget that needs patching. While fiscal surplus suggests reserve capacity, loan payments and costs of financial transactions make cash flow generally negative.
Estonia is looking at moderate price advance caused primarily by growing food and services prices. Slower global growth will contain external price advance and result in somewhat lower fuel prices. Average salary will grow to €1,404 this year and €1,484 in 2020. Salary advance is expected to slow down along with the economy next year.