Public Finances and Fiscal Policy in the Baltic States 1991–2015

Karsten Staehr


This paper discusses the developments in public finances and fiscal policy in the Baltic states since the countries regained independence in 1991. The Baltic states have relatively small public sectors and maintain a limited role for government, in part reflecting the market-oriented economic model emerging from the transition process. The fiscal stance has generally been prudent but Estonia stands out for having an essentially balanced budget every year. The fiscal policy stance exhibits limited counter-cyclicality and has even been pro-cyclical at times, including during the pre-crisis boom. The upshot is that a number of key challenges remain for fiscal policy-making in the Baltic states.

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