Were the strong figures the result of good planning or public sector savings? "Unfortunately, it was not that simple. In general, we know that rising prices are negative for ordinary people, as the cost of living increases and wage growth does not necessarily keep pace with inflation, with incomes catching up only after a delay. From the perspective of the government's fiscal position, however, rising prices are entirely positive because when prices increase, value-added tax revenues also grow," explained Raul Eamets.

Rising prices also lead to wage increases, which in turn boost social tax revenues. "These two increases generated around €600 million in so-called unplanned or additional revenue last year," Eamets added.

Estonia's debt burden remains among the lowest in the European Union.

"What should be a concern is that the deficit of the social security funds grew to €70 million last year. Essentially, this increase is driven by rising pension costs. Looking ahead, key concerns are the growth in healthcare spending and the indexed increase in pensions, as the government is currently unable to cover these with regular tax revenues. We are already 'eating into' Health Insurance Fund reserves to cover healthcare costs and in the future we will have to start financing these expenses through borrowing," Eamets noted.

"In a well-balanced state budget, we cover current expenditures with current revenues and government budget growth should not outpace overall nominal economic growth. Borrowing should be used to cover unexpectedly increased defense spending and for investments. Unfortunately, we are currently also using borrowing to cover the state's day-to-day expenses. Looking ahead, we have two possible paths: reducing public sector spending or increasing the tax burden," Eamets said.

According to data recently published by Statistics Estonia, Estonia's general government budget deficit stood at 1.2 percent in 2025, while debt reached 24.1 percent of gross domestic product (GDP). By the end of the year, total general government expenditure exceeded revenue by €490.5 million.

Pauline Kommer, head of the general government finance service at Statistics Estonia, said that in 2025 all three levels of 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 increased by 8.8 percent, while expenditures rose by 7.4 percent.

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