Albania's general budget deficit narrowed by 54% y/y to ALL 22.2bn (EUR 158.6mn) in the first half of 2014, data from the finance ministry showed. The improvement was due to a 11.7% y/y increase in budget revenues coupled with a 3.7% y/y drop in expenditures.
In our calculations, the deficit accounted for 1.6% of the projected full-year GDP, down from 3.6% in the same period a year earlier.
The increase in budget revenues was supported by a 12.1% y/y rise in tax receipts. Within this group, revenues from VAT increased by 20.7% y/y to ALL 61.2bn. Revenues from corporate income tax (CIT) increased by 31.8% y/y. The growth in VAT and CIT revenues was sufficient to offset falling revenues from excise (down by 2.3% y/y) and personal income tax (down by 6.5% y/y). Total social contributions were up 4.9% y/y in the observed period.
On the expenditure side, capital expenditure declined by 51.9% y/y to ALL 19.8bn. In our view, this sharp decline 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 3.3% y/y to ALL 158.5bn reflecting lower expenditures on operation and maintenance (down by 34.1% y/y).
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 deficit accounted for 4.9% of the projected full-year GDP, up from 3.5% a year earlier. We note that the government projects the budget deficit to widen to 6.5% of GDP in 2014.
|General Budget, H1, ALL bn|
|Total social contributions||29.5||30.9||4.9|
|Total expenditures of which:||205.1||197.4||-3.7|
|Balance (% of GDP forecast)||-3.6||-1.6|
|Source: Ministry of finance|
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