The report also notes the need for a realistic review of macro-fiscal indicators in the mid-term considering their mid-year downward reviews in the past few years in order to precede and orient the country’s economic development
TIRANA, April 16 – The overoptimistic 2012 budget with the GDP expected to grow by 4.3 percent, twice higher compared to what international financial institutions predict for the Albanian economy, and top trade partners Italy and Greece remaining in crisis, reveal the budget of a very difficult year the Albanian economy and public finances will face, according to a report published by the Open Society Foundation for Albania.
“It can be figuratively defined as the budget of big challenges that will materialize between the tough pressure of the crisis and government’s optimism,” says the report analyzing the key indicators of the 2012 budget, its priority sectors and local government.
The report notes that the 2012 economic growth ranging from 2 to 3 percent as international financial institutions expect, will put into real question the achievement of revenue targets and as a result government spending and budget deficit targets under conditions of no new fiscal policies.
Experts have earlier noted that a mere 1.75 percent growth in government revenues, 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 cuts during the year as global crisis impacts become tougher and the Eurozone is expected to face recession.
The Soros report notes the 2012 budget has not analyzed the impacts coming from the situation in Greece and Italy by envisaging special measures. “Such analysis would enable information helping the public and businesses in efficient decision-making and increase government transparency and responsibility in achieving the 2012 budget objectives.”
Despite the budget deficit expected to drop to 3 percent of the GDP in 2012, public debt will slightly rise to 59.6 percent of the GDP, remaining only 0.4 percent below the legal limit.
“Public debt at these maximum levels carries high risks to the performance of the Albanian economy which are related to the structure of debt financing, an increase in the share of foreign financing, the stability of the national currency, the increase in domestic market interest rates and the concentration of debt in the hands of few financial mediators,” says the report.
The report also notes the need for a realistic review of macro-fiscal indicators in the mid-term considering their mid-year downward review in the past few years in order to precede and orient the country’s economic development and not only follow them up by revising budgets.
Denouncing lack of interest group participation in the drafting of budget programmes, OSFA experts say their involvement would increase the reliability of budget target but even individual and business confidence over new investments.
Government spending on the top four priority sectors of infrastructure, education, health and agriculture remain at almost the same levels to the reviewed 2011 targets.
While infrastructure has suffered an 8 percent cut in funding, the remaining sectors have undergone minor increases of 1.2 to 4.6 percent. Although considered priority sectors, their budgets range from 0.5 percent of the GDP for agriculture, 2 percent for health, 2.8 percent for education and infrastructure at 3 percent.
The OSFA working group has also examined Parliament’s role in examining and approving the 2012 draft budget noting lack of interest group participation in discussions at parliamentary committees.
Only parliament and the Constitutional Court were given additional 15 percent and 9 percent additional funding after discussions in Parliament while funds on education and infrastructure underwent slight decreases compared to the initial draft law.
