“This is not a conservative budget, as the IMF and the World Bank suggested but a document permeated by exaggerated bragging and unfounded government promises,” says Gjergj Filipi, of the Agenda Institute
TIRANA, Nov. 21 – Already having made a mid-year budget cut and a new one scheduled for next December, Albanian economy experts remain skeptical of the 2012 budget government has introduced as more conservative and realistic. Researchers say economic growth will slow down and government will continue facing difficulty with tax collection and privatizing the few important assets remaining under state ownership while investments remain at risk because of the public debt at the legal ceiling of 60 percent of the GDP and the escalation of the Eurozone crisis.
“This is not a conservative budget, as the IMF and the World Bank suggested but a document permeated by exaggerated bragging and unfounded government promises. This is the fourth budget experts have been raising the alarm over the staggering debt,” Gjergj Filipi, the research director of the Agenda Institute tells VoA in the local Albanian service.
Zef Preci, the director of the Albanian Centre for Economic Research shares the same view, describing the 2012 budget which is already being examined in Parliament as overoptimistic and warns of another budget in mid-2012 as government has done during the past couple of years.”The draft budget contains unjustified government optimism over investments and paying off debts because privatization revenues have dropped and international financial institutions have forecast a slowdown in the Albanian economy. Government will find it difficult to meet its revenues targets and by mid-2012 it could review the budget again to make new cuts which will affect ongoing investments,” says Preci.
Experts also warn of a slowdown in foreign direct investment, which ranked Albania as the second largest South East European recipient from 2005 to 2010, citing investors’ hesitation in these times of Eurozone crisis and the country’s fragile macroeconomic stability with public debt and its relatively high cost as the top concern.
The views of these Albanian experts are in line with the recently slashed economic growth forecast released by international financial institutions such as the IMF, the World Bank, and the EBRD, fearing impacts from neighbouring Greece and Italy, where more than 1 million Albanian migrants live and work also making an important contribution with remittances.In its latest review of the 2012-2014 macroeconomic framework, the government expects the country’s GDP to grow by 3.9 percent in 2011 and 4.3 percent in 2012 compared to 5 percent and 5.1 percent respectively last July when the budget was cut by 5 percent.
Revenue expectations have also been lowered to around 330 billion lek compared to 344 billion lek under mid-year budget review. Meanwhile, expenditure has also been cut by 14.2 billion lek to 376.6 billion lek.
Public debt is expected to be at 59.3 percent of the GDP for 2011 and 59.4 percent in 2012. Government is expected to make the new changes under a normative act at the end of next December, cutting another 14.2 billion lek after the budget was cut by 18.3 billion lek (USD 183 million, Euro 130 million) in an effort to keep rising public debt and budget deficit levels in check.
Meanwhile, international financial institutions have cut their forecast for Albania’s GDP growth to 2 percent for this year and 1.5 percent for 2012.
IMF’s Gerwin Bell has described Albania’s newly drafted 2012 budget with revenues expected to grow by 8 percent, as remaining overoptimistic despite the government insisting on having drafted a more conservative and realistic budget for 2012.
With public debt at around 60 percent of the GDP, Albania remains the most vulnerable country among six EU- aspirant South East European countries, according to a new World Bank “South East Europe Regular Economic Report”.
What puts the Albanian public debt more at risk is that it accounts for more than double the annual revenues, while interest expenditure has risen to 3.4 percent of the GDP, compared to an average of 1.3 percent in the SEE 6, said the World Bank in a recent report on six SEE countries aspiring to join the EU.
