At 40 billion lek for the first nine months of this year, public investments are 4 billion lek less than planned and 7 billion lek less compared to the first three quarters of 2011
TIRANA, Oct. 23 – Government revenues suffered another blow in Sept. 2012 when they dropped to 26 billion lek, registering the lowest Sept. rate for the past four years. Latest Finance Ministry data show government revenues for the first 9 months of this year total grew by only 2.3 percent to 245 bln lek year-on-year. The poor performance in Sept. 2012 ended the revenues upward trend after the 3.7 percent increase registered for the first eight months of this year.
With VAT and excise tax income far below expectations, government has failed to collect 16 bln lek (euro 112 mln) or 6.2 percent less than planned for the first three quarters of this year. The slowdown in revenues has also affected public investments. At 40 billion lek for the first nine months of this year, public investments are 4 billion lek less than planned and 7 billion lek less compared to the first three quarters of 2011.
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.
The value added tax, which accounts for around 38 percent of total tax revenues, and indirectly measures consumption, grew by only 1.6 percent in Jan-Sept. 2012 but was down around 5 billion lek compared to the set target. The excise tax imposed on the so-called luxury goods was down by 2.6 percent compared to the first nine months of 2011, revealing that Albanians have cut down on fuel, tobacco, coffee and beer consumption in these times of crisis.
What’s worse businesses continue suffering with the profit tax for the first eight months of 2012, down by 16.6 percent.
Low revenues are also putting government into difficulty with the budget deficit at 25 billion lek, 73 percent higher compared to targets for the first 9 months of 2012.
The pension scheme deficit continues widening as it rose to 30 billion lek in Jan-Sept. 2012 compared to 27 billion lek a year ago.
During the first nine months of 2012 government also spent around 29 billion lek in interests, up 184 million lek compared to the same period last year as the public debt stands at the legal ceiling of 60 percent of the GDP. Estimated at over 800 billion Lek currently, the public debt costs the Albanian government 3 percent of the GDP or 50 billion lek (euro 357 million) in interest payment annually.
Privatization revenues for the first three quarters of this year reached 782 million lek, more than double compared to last year.
An expected staggering amount of Euro 850 mln from the privatization of oil firm Albpetrol postponed government plans to review downward its overoptimistic revenue target of a 7.8 percent growth rate. The latest government intervention to the 2012 budget was made though a normative act cutting 2.5 billion lek (Euro 17.5 mln) in grants to local government units to pay off debts water supply companies under their administration owe to distribution power operator CEZ Shperndarje. Government also awarded cash-strapped state-owned power corporation KESH a Euro 40 mln guarantee in order to secure power imports for the remaining of the year as CEZ has been unable to fulfill its legal obligation of covering its grid losses with imports.
In its review to the 2013-2015 macroeconomic framework approved by government on July 1, the 2012 GDP growth forecast has been lowered to 3 percent, down from 4.3 percent in the initial budget and the public debt raised to 59.9 percent of the GDP, only 0.1 percent below the legal threshold. For 2012, government has cut revenue expectations by 11.7 billion lek to 344 billion lek, an increase of only 4 percent.
Lower domestic consumption, stagnating exports, some of the key industries in crisis, lending and deposits growth rates slowing down and government revenues far below targets are some of the symptoms of the ailing Albanian economy in the first half of 2012. Poor performance in early 2012 when the economy officially shrank by 0.2 percent and a 2 percent growth rate in the second quarter of 2012 indicate the Albanian economy will suffer severe impacts from the crisis in the Euro area and problems at home where domestic consumption, the key driver of growth, remains sluggish.
