TIRANA, Dec. 1 – Government revenues failed to meet the target by 4 billion lek (€29 million) in the first ten months of this year as the key VAT and excise taxes continued underperforming even after a mid-year budget cut which will unescapably be accompanied by a new year-end revision.
Commodity prices at a record low also affected the mining royalty that the customs administration collects on key oil and mineral exports.
Finance Ministry data shows government revenue rose by 7.3 percent to 334 billion lek (€2.43 billion) in the first ten months of this year, but yet failed to meet the target by 1.2 percent even after a mid-year budget cut slightly revising targets and a late 2015 nationwide campaign formalizing thousands of businesses previously operating informally.
The key value added tax and the excise taxes, accounting for a third of government revenue, continues underperforming, hinting sluggish domestic consumption.
The royalty tax levied on oil and minerals also dropped by 34 percent to 2.2 billion lek (€16 million) as investors have cut production waiting for international prices to recover.
Public investments were almost on target but current expenditure was kept below targets to result in a budget surplus of €95 million for the first ten months of this year, as the government tries to meet its target of bringing public debt slightly down to 71.8 percent of the GDP and reduce it to a more comfortable level of 60 percent of the GDP for the stage of Albania’s development in the next few years.
In its 2017 fiscal package, the Albanian government says it expects tax revenue to underperform by 4.5 billion lek (€32.7 million) by the end of 2016.
The new budget cut could also slightly affect government expectations of a 3.4 percent GDP growth for 2016, slightly above forecasts of 3 to 3.2 percent by international financial institutions.
The tight spending policy the government is applying this year in order to slightly bring down public debt to 71 percent of the GDP is also affecting much-needed public investments which are forecast to register their lowest levels in the past seven years.
The Albanian government plans to spend about 60 billion lek (€432 million) or 3.9 percent of the GDP on public investment in 2016 compared to 4.3 to 5 percent of the GDP in the previous seven years.
