Govt revenues decelerate to 2% in Jan-May

TIRANA, June 20 – Poor performance in government revenues in May 2012 reconfirmed the need for budget cuts government plans to make in mid-July for the third year in a row. Finance Ministry data show total government revenues in the first five months of 2012 decelerated to 2 percent failing to meet the targets by 6.2 percent. Government revenues slightly improved in April 2012 when they accelerated to 2.5 percent for the first four months of this year, compared to an increase of only 1.2 percent in the first quarter.
Tax revenues which account for 90 percent of the total failed to meet targets by 7 billion lek or 5.5 percent during the first five months of 2012. VAT and excise taxes which indirectly measure domestic consumption, the key contributor to Albania’s growth, rose by 2.2 percent and 1.1 percent respectively. However, what’s most concerning, profit tax performance further deteriorated to 23.1 percent drop.
Data show government is facing difficulty in preserving the deficit which at -19 billion lek for the first five months of this year stands 3.4 times above the target. The situation is a result of government exceeding spending targets in Jan-May 2012 by 4.7 billion lek, investments at an extra 3 billion lek, and a Euro 2 billion loan to state-run power corporation KESH for emergency power imports.
Under the current budget, government expects revenues to increase by 7.8 percent and the economy to grow by 4.3 percent for 2012, which is twice higher compared to what international financial institutions forecast. Experts have earlier noted that a mere 1.75 percent growth in government revenues for 2011, the lowest in the past 11 years and failure to meet revenues targets by 4 percent even after mid-year budget cuts in 2011 is the clearest sign government has drafted an overoptimistic budget for 2012 and will be forced to make sharp mid-year cuts as global crisis impacts become tougher and the Eurozone is expected to face mild recession.
However, ruling Democratic Party MPs have assured the budget will not undergo major cuts due to expected revenue from privatizations. According to Sherefedin Shehu, a ruling Democratic Party, cuts will be at around 7-8 billion lek (euro 56 million) which is 2 percent of the total budget for 2012.”I think there is a lot of space not to affect investments because privatization revenues will be destined 100 percent for investments,” Shehu told local media this week.
Government is expected to sell four small-and medium sized hydropower plants, Albpetrol oil company, INSIG insurer and remaining minority stakes in several enterprises.