Government forecasts 6.5 GDP growth and 3.9 percent budget deficit in 2010

TIRANA, Nov 17 – Albania’s Finance Ministry said Tuesday it expects economic growth to accelerate to 6.5 percent next year, up from the 5 percent forecast for 2009.
The country posted an 8 percent increase in economic growth in 2008. Its economy has been expanding at an average rate of 6 percent over the past couple of years.
The government forecast is much higher than predictions from the IMF, World Bank, and EBRD, which see the country not growing higher than at 3 percent in 2009. However, the current forecast is well supported by official data from the Bank of Albania (BoA), which reported a 5.35 percent GDP growth at the start of the year.
Albania’s gross domestic product is expected to reach 1.279 trillion leks (9.29 billion euro) next year, compared to 1.167 trillion leks projected for this year, a draft of the 2010 budget bill posted on the ministry’s website showed.
GDP per capita will reach 2,900 euro compared to 2,670 euro in 2009 and average inflation will quicken to 3 percent in 2010 from the 2.3 percent projected for this year. Albania had an annual average inflation rate of 3.4 percent last year.
The current account gap is seen narrowing to 12.2 percent of the projected gross domestic product from a projected gap of 14.2 percent this year. The short fall in the trade balance is seen falling to 23.5 percent of GDP in 2010 from 24.7 percent in 2009.
In 2010, the Albanian government will target a budget gap of 3.9 percent of GDP, or 49.8 billion leks, down from 6.4 percent, or 74.8 billion leks, this year.
2010 budget revenue is expected to be 10.7 percent higher on the year at 360.955 billion leks, including 328.729 billion leks in tax revenue. The government considers that the huge increase in tax revenues will come as a result of its fight against informality and fiscal evasion.
Despite the double digit increase in budget revenues, budget spending is projected to rise by only 2.4 percent to 410.721 billion leks, or 32 percent of the projected GDP. According to Finance Minister Ridvan Bode, the government doesn’t plan on considerable revenues from privatization tenders as it did in 2009.
A major reform is expected to cut down administrative spending and direct the extra funds toward salaries and pensions. Salaries are expected to rise between 4 and 10 percent, while the increase in pensions is projected between 7 and 10 percent. The main beneficiaries will be health workers, police, and army officers.
On an interesting note, according to the draft-budget, Albanian president Bamir Topi will benefit a 54 euro salary increase per month as of June 2010. President Topi’s current monthly salary is 1,815 euro.
The government will continue to spend in public investments, which will count for 9 percent of the GDP in 2010. Energy, healthcare, education, agriculture, and social assistance will be the priority sectors according to the Finance Ministry. In addition, a regional investment fund of 55 billion leks will be included in the budget to target the development of the poorest regions in Albania.
According to Finance Ministry estimated, the country’s population will reach 3.19 million people at the end of 2010, compared to 3.18 million at the end of 2009 and to 3.17 million at the end of 2008.