Albania's general budget deficit narrowed by 43.7% y/y to ALL 30.9bn (EUR 392mn) in January to August 2014, data from the finance ministry showed. The improvement was mainly due to a 12.5% y/y increase in budget revenues.
In our calculations, the deficit accounted for 2.2% of the projected full-year GDP, down from 4.2% in the same period a year earlier.
The increase in budget revenues was supported by a 12.2% y/y rise in tax receipts. Within this group, revenues from VAT increased by 16.3% y/y to ALL 81.6bn, with VAT on domestic consumption up by 23.3% y/y and VAT, collected by the customs, rising by 14.4% y/y. Revenues from corporate income tax (CIT) increased by 13.9% y/y and receipts from excise duties advanced by 8% y/y. By contrast, revenues from personal income tax declined by 8% y/y in Jan-Aug. Total social contributions were up 5.7% y/y in the observed period.
On the expenditure side, capital expenditure decreased by 44.2% y/y to ALL 26.9bn. In our view, this sharp drop could be attributed to the higher base effect, since the high level of public investment in H1 2013 was influenced by the election cycle. Current expenditures dropped by 1.1% y/y to ALL 214.6bn reflecting lower expenditures on operation and maintenance (down by 19.8% y/y).
The fiscal data also showed that Albanian government has started in March 2014 clearing arrears towards private with total payments estimated at ALL 25.9bn as end-August 2014.
Last year Albania's general budget deficit widened by 42.7% y/y to ALL 65.4bn, as revenue fell while expenditures increased. In our calculations, the gap equalled to 4.9% of the projected full-year GDP, up from 3.5% a year earlier. The government expects the budget deficit to widen to 6.5% of GDP in 2014.
|General Budget, Jan-Aug, ALL bn|
|Total social contributions||39.8||42.0||5.7|
|Total expenditures of which:||265.2||267.3||0.8|
|Balance (% of GDP forecast)||-4.1||-2.2|
|Source: Ministry of finance|
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