TIRANA, Sept. 9 – The Albanian government says the overoptimistic forecasts in late 2014, a lower than expected economic growth, a sharp cut in tobacco imports, a cut in international oil and base metal prices and lower interest rates were the reasons that led to the budget cut last July.
In a report submitted to Parliament, the government expects the sharp drop in international oil prices to continue having a negative impact by affecting exports and the royalties government collects.
The Finance Ministry says lower interest rates from the cut of the key rate, the VAT exclusions on imports of machinery and insurance market, and lower imports will continue to have a negative impact in the second half of 2015.
Fuel and cigarette imports declined in first half of this year, unveiling that Albanians have cut down on these two so-called luxury items after consecutive tax hikes in the past few years.
Data published by the country’s customs administration shows fuel imports, which meet the overwhelming majority of domestic consumption, dropped to 190,284 tonnes in the first half of this year, down 5.4 percent or 10,900 tonnes compared to the same period last year and 1.7 percent less compared to the first half of 2013.
Meanwhile, the consecutive increases in the tobacco excise rates have considerably affected imports which dropped to 1,083 tonnes in the first half of this year, down by 7 percent compared to the same period last year, but a sharp 30 less percent compared to the first half of 2012 when the excise rate was at 70 lek (€0.5) for a 20-cigarret pack compared to 110 lek (€0.77) currently.
The poor performance in the first half of this electoral year forced the Albanian government to revise downward its overoptimistic 2015 budget while the International Monetary Fund has postponed its new loan tranche as part of a three-year Euro 331 million loan.
In its latest meeting, the government approved 16.2 billion lek (€114.6 million) in spending cuts following failure to meet its revenue target.
The Socialist Party-led left wing majority approved a rather overoptimistic budget for 2015 expecting an 11 percent increase in revenue, a 3 percent GDP growth and a slight reduction of public debt already hovering at 72 percent of the GDP.
The Albanian government and the IMF have recently revised Albania’s 2015 GDP growth to 2.7 percent down from an initial 3 percent on lower international oil prices affecting exports and spillover impacts from the crisis in neighboring Greece.
Top trade partner Italy escaping recession and the start of the Trans Adriatic Pipeline construction are expected to have a major impact on the Albanian economy in 2015 after sluggish GDP growth rates of 1 to 2 percent in the past three years.
Public debt at around 70 percent of the GDP, non-performing loans at around a quarter, lending struggling to remain at positive growth rates and a slowdown in exports are considered key barriers to Albania’s growth.
