Budget cuts lower public investments in 2010

TIRANA, Feb. 8 – Public investments registered a significant drop in 2010 when government was forced to make major budget cuts to reduce budget deficit and keep the high public debt levels in check.
Finance Ministry data published by the Bank of Albania this week show capital expenditure, which includes investments in roads, hospitals and schools, dropped to 67.5 billion lek (670 million dollars), down from 96 billion lek in 2009, which was also an electoral year.
Meanwhile, current expenditure continued increasing as government made another increase in wages and pensions last July. Finance Ministry data show current expenditure rose to nearly 300 billion lek, up from 284 billion lek in 2009.
Despite revenues growing by 8 percent to 324.9 billion lek, up from 299.5 lek at the end of December 2009, the country’s budget deficit continued narrowing. Ministry’s preliminary data show the trade gap more than halved to -37 billion lek compared to a record – 80.3 billion lek at the end of 2009, taking the deficit to 3.1 of the GDP, down from a record 7 percent.
Meanwhile, tax revenues at the end of December 2010 continued growing slowly, climbing to 288.8 billion lek, compared to 270.8 billion lek at the end of December 2009.
With budget revenues expected to grow by 11 percent, 2 percent more than under the revised 2010 budget, government projects the Albanian economy will grow by 5.5 percent in 2011, up from an estimated 4.1 percent in 2010, which is almost twice higher compared to what international financial institutions project.
The Finance Ministry’s main priorities in 2011 will be keeping the high public debt under control, currently at 59.5 percent and expected to drop to 59 percent of the GDP by the end of this year, keeping inflation rate within the central bank’s 3ѱ percent and further reducing current account deficit to preserve the country’s macroeconomic stability. The 2011 budget, considered the biggest ever at 4 billion dollars will continue supporting wage and pension increases, and keep deficit in check. The 2011 budget, worth 409 billion lek (4.08 billion dollars) and with revenues at 362.2 billion lek, will take budget deficit to 46.8 billion lek, up from 38.1 billion lek in 2010 or 3.5 percent of the GDP.
Unemployment rate is also expected to be brought down to 12.5 percent down from 13.6 percent in 2010.
Last July, government lowered its 2010 GDP growth forecast to 4.1 percent, down from the previous 5.5, after deciding to cut spending by 25 percent, some 39 billion lek (390 million dollars). Minister Bode said the changes, which came immediately after a wage and pension hike by up to 12 percent, were aimed at keeping under control the country’s public debt and bring the budget deficit down to 3.1 percent by the end of 2010.