TIRANA, Nov. 19 – Underperforming revenue resulting in a mid-year budget cut have forced the Albanian government to draft a more realistic budget for 2016 when it expects revenue to increase by 5 percent and spending to drop by 1 percent in a bid to reduce the deficit and public debt. The Albanian government expects the economy to accelerate to 3.4 percent in 2016, up from 2.7 percent in 2014, which would be the highest growth rate since 2010 after sluggish growth of 1 to 2 percent in the past three years.
In its 2016 budget, the Albanian government expects revenue to increase to 417.7 billion lek (€2.98 billion) and spending to slightly drop to 452 billion lek (€3.22 billion) in an effort to bring down the deficit to 2.2 percent of the GDP, down from an expected 4 percent in 2015.
The tight spending policy will allow the Albanian government to also bring down public debt to 70.9 percent of the GDP in 2016, down from a historic high of 73.7 percent at the end of the third quarter of 2015.
Public investments will also be affected as they are expected to drop to 60.5 billion lek (€432 mln) or 4 percent of the GDP in 2016, down from 4.4 percent of the GDP in 2015, in one of the lowest levels in the past 8 years.
The Albanian government expects the major boost in income to come from the value added tax, the key tax accounting for a third of total government revenue. VAT, which is also an indicator of domestic consumption, is expected to increase by 5.7 percent to 138.7 billion lek (€990 million) in 2016.
The ongoing construction of Albania’s Trans Adriatic Pipeline section bringing Caspian gas to Europe and that of the Devoll hydropower plant by Norway’s Statkraft is expected to have a positive impact on investments and employment.
The poor performance in the first half of this electoral year forced the Albanian government to revise downward its overoptimistic 2015 budget while the International Monetary Fund postponed its new loan tranche as part of a three-year Euro 331 million loan.
Lower international oil and base metal prices and poor consumption forced the Albanian government to cut spending by €114.6 million while the GDP growth for 2015 was later revised down to 2.7 percent, down from an initial forecast of 3 percent.
Back in 2014, the Socialist Party-led left wing majority approved a rather overoptimistic budget for 2015 expecting an 11 percent increase in revenue, a 3 percent GDP growth and a slight reduction of public debt already hovering at 73 percent of the GDP.
