This time was different: the budgetary responses to the pandemic-induced crisis in Estonia

Abstract

PurposeSince regaining its independence, the Estonian government has followed policies of fiscal consolidation when responding to economic crises. Its response to the COVID-19-crisis has been quite different – it has authorized additional expenditures, cut taxes and incurred considerable debt. This paper gives an overview of the budgetary measures adopted and explores the question: why was it different this time?Design/methodology/approachThe authors draw upon policy documents to zoom in on the main political, institutional and economic factors that help to explain Estonia's departure from extreme fiscal conservatism in the midst of the global pandemic.FindingsThe authors found the key political factors to be the party composition of the government, policy diffusion and policy learning. Key economic factors included Estonia's very low level of debt prior to the crisis and credit market advantages gained from Eurozone membership.Originality/valueEstonia presents an interesting case because in all previous crises it responded with fiscal consolidation, whereas it is now responding with extensive fiscal stimulus.

COVID-19 policy responses: reflections on governmental financial resilience in South Asia

“…In this regard, countries such as South Korea and Estonia's efforts to stretch their financial space also could be relevant. For instance, Raudla and Douglas (2020) state that Estonia was in a better position to respond to COVID-19 JPBAFM 32,5 compared with the 2008 financial crisis, through having maintained financial discipline and public debt over the recent years. Kim (2020) mentions about South Korea's strong short-term fiscal resilience resulted by the country's effective debt management, although the future viability has raised concerns.…”

“…However, such individual country efforts should be supplemented by forging collaboration between countries, as part of the strategy to develop the longer-term financial resilience of the region. For instance, membership of the European Union has enabled Estonia to facilitate negotiation with international investors for favourable borrowing rates and obtain favourable rating for its bond (Raudla and Douglas, 2020). SA governments need to develop a collaborative approach (SAARC) at the regional level, which would certainly put them in a stronger position to manage future pandemics, through developing financial resilience across the region.…”

Budgetary responses to a global pandemic: international experiences and lessons for a sustainable future

“…Also, it is difficult to pinpoint a common set of factors that determined the magnitude, policy scope and approaches of fiscal responses. While the severity of the COVID-19 pandemic appeared to be positively related to the magnitude of fiscal responses in many countries (Cepiku et al , 2020; Cho and Kurpierz, 2020; de Jong and Ho, 2020; de Villiers, et al , 2020), the domestic ideological space for politicians to act (Andrew et al , 2020; Argento et al , 2020; Raudla and Douglas, 2020; Vakulenko et al , 2020) and the anticipated fiscal space and long-term economic capacity to support extra spending (Argento et al , 2020; de Jong and Ho, 2020; de Villiers et al , 2020; Ejiogu et al , 2020; Nemec and Špaček, 2020; Raudla and Douglas, 2020) seemed to matter more in some countries than others. For some developed economies, such as the US and some European countries, pre-pandemic problems of indebtedness did not have a significant constraining effect on further borrowing and the use of tax relief chosen by policymakers (de Jong and Ho, 2020).…”

Ideological and financial spaces of budgetary responses to COVID-19 lockdown strategies: comparative analysis of Russia and Ukraine

“…de Villiers et al, 2020) and in some post-Soviet countries (e.g. Raudla and Douglas, 2020). Since budgeting involves ".…”