Data show domestic consumption, the key driver of Albania’s growth, remains poor as indirectly shown by the performance of the value added tax which dropped to 15.5 billion lek, down 9 percent compared to the first two months of 2012
TIRANA, March 19 – Government revenue during the first two months of this year indicates the Albanian economy continues suffering and domestic consumption, the key driver of growth, remains sluggish. Finance Ministry data show government collected a total of 49.6 billion lek in the first two months of this year, up only 0.7 percent compared to the same period last year. The tax and customs administration managed to collect only 32.4 billion lek, down from 33.4 last year mainly due to poor performance in the value added tax and the excise taxes.
Data show consumption remains poor as indirectly shown by the performance of the value added tax which dropped to 15.5 billion lek, down 9 percent compared to the first two months of 2012. After registering a double digit decline last year, profit tax rose by 13 percent while excise taxes collection dropped by 6.5 percent.
The deficit in February 2013 slightly rose to 7.4 billion lek, mainly on higher expenditure on interest rates. With the public debt officially above the former 60 percent of the GDP ceiling, the Albanian government spent 7.9 billion lek in interest rates during the first two months of 2013, up from 6.5 billion lek in the same period last year. Public investment, expected to increase as general elections come closer, slightly rose to 7 billion lek, remaining at almost the same levels.
The deficit in the pension scheme rose to 4.8 billion lek, up from 4.7 billion lek a year ago.
For the first time since 1997 when the notorious pyramid schemes collapsed and the economy suffered a sharp 11 percent shrink, government revenues suffered an annual drop, revealing the escalating woes of the Albanian economy since the onset of the global crisis in 2009. Finance Ministry data show total revenues shrank by 0.2 percent to 330 billion lek (Euro 2.3 billion) in 2012, registering the first annual shrink in the past 15 years. The performance proves the escalation of impacts from the global crisis and rising public debt now standing above the former 60 percent of the GDP ceiling.
The Finance Ministry data reconfirm the stagnation of domestic consumption, which is the key driver of the Albanian economy at a time when exports’ growth has considerably slowed down due to escalating crisis in the Eurozone and especially top trade partners Italy and Greece.
Public investments, included in the capital expenditure item, dropped to 60 billion lek (Euro 421 million) in 2012, down 14 percent compared to 2011 registering the lowest level since 2007.
Revised indicators
Facing a sharp drop in revenues, the Albanian government has been forced to revise downward its overoptimistic GDP growth rates and increase debt levels several times during the past year. The latest review was made last January in the 2013-2015 economic and fiscal programme where the GDP growth forecast for 2012 was cut to 1.5 percent down from an overoptimistic 4.3 percent targeted in the initial 2012 budget. Meanwhile, public debt, whose 60 percent of the GDP ceiling was lifted in late 2012, is expected to rise from 61.9 percent in 2012 to 63.8 percent at the end of 2013, compared to a target of 62.6 percent in the 2012 budget.
The Albanian government expects growth to accelerate from 3.1 percent in 2013 to 4.1 percent in 2015, twice higher compared to what international financial institutions have forecast.
The budget deficit is also expected to climb to 3.7 percent of the GDP at the end of 2012, up 0.7 percent compared to the initial target and remain at 3.5 percent even in 2013 when Albania holds general elections.
Both government revenues and spending registered a shrink in 2012 when they dropped to 24.7 percent and 28.4 percent of the GDP respectively, down 0.8 percent and 0.6 percent compared to 2011.
With an average growth rate of 1.5 percent during the first nine months of 2012, the Albanian economy is reflecting clear signs of crisis from the Euro area partners and developments at home where domestic consumption and exports remains sluggish, and public debt now beyond the previous legal ceiling of 60 percent of the GDP poses a real threat to the country’s macroeconomic stability.
