The deficit, including social security and state and municipal spending, rose to EEK5.57 billion from EEK2.06 billion a year earlier, according to data published on the statistics office’s website today. The gap corresponds to 2.5% of gross domestic product, according to Bloomberg calculations based on the Finance Ministry’s forecast for Estonian GDP for 2009.
The first-quarter figure means the government will have to keep the deficit below 0.5% of GDP for the rest of the year to meet euro-entry criteria. Finance Minister Jurgen Ligi has said he sees no improvement in the economy before the third quarter, giving clues on the feasibility of this challenge.
For instance, Eiki Nestor, member of Social Democratic Party and MP, clearly explained a couple of days ago that in spite of huge budget cuts, the goal to maintain budget deficit below 3% of GDP is not realistic. “When increasing VAT is a wrong decision in difficult time, then cutting sick benefits can be called nonsense. Especially in situation where cutting task wasn’t done and Health Insurance Fund has supplies for previous reasonable decisions” he wrote to Postimees.