Pauline Kommer, head of the general government finance service at Statistics Estonia, said that in 2025 all three components of the general government ended the year in deficit.

As in the previous five years, the largest shortfall was in central government, amounting to €326.4 million.

In 2025, general government revenues grew by 8.8 percent, while expenditures increased by 7.4 percent.

"Although revenues grew somewhat faster than expenditures, overall expenditures still exceeded revenues last year by €490.5 million, which is 1.2 percent of GDP," Kommer explained.

Compared with 2024, the central government deficit decreased to €326.4 million and the deficit of local governments also shrank, totaling €95.2 million. While social security funds recorded a surplus the year before, 2025 ended with a deficit of €68.9 million.

Social benefits and investments biggest contributors

Expenditure on social benefits saw the largest increase last year, rising by €230 million, including €183 million in pension payments.

Investments grew by €306.3 million, driven primarily by increases in national defense and infrastructure spending.

Labor costs also rose in both central government and local governments last year, by 6.3 percent and 3.8 percent respectively, although the pace of growth has slowed over the past two years. In social security funds, labor costs decreased by 6.3 percent.

The rise in the deficit was curbed by a €498 million increase in personal income tax receipts compared with the previous year, supported by wage growth and a rise in the income tax rate in 2025.

Revenue growth was also boosted by an additional €331.7 million in value-added tax (VAT) receipts.

"This was driven by both the increase in the VAT rate and rising price levels, which raised the value of taxable turnover and, in turn, the amount of tax collected. Social tax revenue increased by €276.9 million, mainly due to overall wage growth," Kommer said.

Maastricht debt up €676 million on year

The consolidated general government debt (Maastricht debt) stood at €10 billion at the end of 2025, or 24.1 percent of GDP, having increased by €675.8 million compared with 2024. The general government debt-to-GDP ratio rose by 0.6 percentage points year on year.

Central government total debt grew by 5.3 percent, or €478.9 million, compared with the previous year, reaching €9.6 billion by the end of the year.

The increase in central government debt was mainly driven by the state's €500 million bond issuance, bringing the total volume of bond liabilities to €5.9 billion at the end of 2025. Due to repayments of long-term loan obligations, their volume decreased by 5.2 percent over the year, totaling €2.4 billion by the end of 2025.

Liabilities to the rest of the world, or the share of external debt in central government debt obligations, accounted for 72 percent, decreasing by 1.6 percentage points year on year.

The total debt of local governments stood at €1.7 billion at the end of the year, having increased by 7.4 percent over the year.

"If the growth in central government debt was driven by the issuance of new bonds, while the volume of loan obligations declined, then the situation for local governments is the opposite," said Pauline Kommer, adding that the increase in debt was due to the taking on of new long-term loans, which raised liabilities by €122.2 million.

The volume of long-term bonds, however, continued to decline, decreasing by €6.7 million over the year.

As with central government, the share of external debt in local governments also declined compared with the previous year, accounting for 25.4 percent of local government debt in 2025.

Social security funds — the Health Insurance Fund and the Unemployment Insurance Fund — did not contribute to general government debt.

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