Estonia Central Bank Governor Warns Against Permanent Budget Deficit
Madis Müller, the Governor of the Bank of Estonia, addressed the Riigikogu during a plenary session to present the central bank's 2025 annual report. In his final address as head of the institution, Müller emphasized that while increased defense spending is unavoidable due to current security challenges, the resulting budget deficit must not become permanent. He highlighted that Estonia's public debt is projected to double from 10 billion to nearly 21 billion euros in 2025, driven by defense needs, tax system changes, and an aging population. Müller noted that although inflation has subsided towards the two percent target and the economy recovered with a 0.6 percent GDP growth, rising interest costs threaten future fiscal space. He urged politicians to reach a cross-party agreement on managing public finances to curb debt growth and maintain investor confidence. Additionally, he reported that the labor market remained resilient, with low unemployment helping borrowers manage obligations, while identifying rapid loan growth and foreign funding reliance as key risks to the financial system.
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Estonia Central Bank Governor Warns Against Permanent Budget Deficit
Madis Müller, the Governor of the Bank of Estonia, addressed the Riigikogu during a plenary session to present the central bank's 2025 annual report. In his final address as head of the institution, Müller emphasized that while increased defense spending is unavoidable due to current security challenges, the resulting budget deficit must not become permanent. He highlighted that Estonia's public debt is projected to double from 10 billion to nearly 21 billion euros in 2025, driven by defense needs, tax system changes, and an aging population. Müller noted that although inflation has subsided towards the two percent target and the economy recovered with a 0.6 percent GDP growth, rising interest costs threaten future fiscal space. He urged politicians to reach a cross-party agreement on managing public finances to curb debt growth and maintain investor confidence. Additionally, he reported that the labor market remained resilient, with low unemployment helping borrowers manage obligations, while identifying rapid loan growth and foreign funding reliance as key risks to the financial system.
The Baltic Times