Govt reviews GDP, expenditure targets again

TIRANA, Nov. 8 – Overoptimistic projections made at the beginning of the year have forced government to review the 2012 macroeconomic and fiscal framework for the second time this year, lowering GDP growth, revenue and expenditure expectations.
In its latest review, 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.
While deficit has been left unchanged at 3.5 percent of the GDP, expenditure on pension contributions has been raised by another 1.5 billion lek to 86.4 billion lek for 2011.
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.
Latest Finance Ministry data show total government revenues during the first nine months of this year have grown by only 1.1 percent compared to the same period last year, but remain 2.5 percent below the revised targets. Government had initially predicted government revenues would rise by 11.5 percent this year but lowered it to 5.9 percent last July. The situation is mainly a result of poor progress in tax collection, with revenues reported 3.4 percent up year on year, but 3.1 percent down or around 7 billion lek less compared to the target for the first 9 months of this year. VAT and excise tax revenues, which account for 50 percent of total tax revenues and are indirect indicators to measure domestic consumption, have grown by only 0.5 percent and 1.7 percent, respectively during the first three quarters of this year.