Page 65 - CE Outlook Regions 2022

4.2 Budget and debt - Estonia

In 2022, the revenues of the state budget are expected to total
€13.13bn, expenditures amount to €13.64bn and investments will be
made in the amount of €716mn. State budget revenues will grow by
17% and expenditures by 3% in 2022.

Compared with the 4.9% structural deficit of the general government
projected for 2022 a year ago, Estonia will reach a deficit of 2.6% in
the budget for the coming year, which is 0.8 percentage points better
than planned in the spring. The nominal position is -2.2 percent of GDP,
which would help Estonia comply with the budgetary rules of the EU –
which have been temporarily suspended during the COVID-19 crisis. In
the spring, it was estimated that Estonia would only achieve this goal by
2024.

Fitch forecasts the fiscal deficit to narrow to 3.5% of GDP in 2021 from
4.9% in 2020. It says the fiscal deficit should narrow to 2.1% of GDP in
2022, as the health crisis subsides and support measures are gradually
unwound.

The tax burden in 2022 will be 33.7% of gross domestic product (GDP),
which is one percentage point less than this year's level.

The salaries of healthcare workers, teachers, police officers, ambulance
and cultural workers will increase in 2022. The state budget ensures an
increase in the salary of healthcare workers agreed in the collective
agreement of medical workers – over 7% for the minimum hourly wage
of doctors and nurses and over 9% for that of care workers. The
salaries of state-funded welfare service providers will also rise to the
same level as nursing staff.

In 2022, the minimum wage of emergency workers will rise by 12%,
doctors' and nurses' salaries will rise by 8%, and minimum wages for
teachers and graduate cultural workers will increase by more than 7%.

The average pension will increase by nearly 7% to €590.
Mindful of scientific innovation and science-intensive business, Estonia
will invest in 2022 1% of GDP, or €324mn, in research and
development.
In 2022, Estonia will invest €190mn in the green and digital transition by
tapping into EU structural funds.

Notably, defence expenditure in Estonia will reach a record €748mn in
2022, accounting for 2.31% of predicted GDP and marking a €103mn
year-on-year increase.

Demographic changes, which are already underway and will become
even more pronounced in 2022, may lead to an increase in the tax
burden already in 2022. To prevent the tax pressure on the shrinking
working-age population from becoming unbearable, containing of public

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