Macedonia's central government budget deficit widened to MKD 15.4bn (EUR 250.7mn) at end-July 2014 from MKD 14.3bn a year earlier, finance ministry data showed. We estimate that the gap for the first seven months of the year is equivalent to 3.1% of the projected 2014 GDP. The seven-month deficit already reached 84.5% of the still effective full-year target of MKD 18.3bn (3.7% of GDP).

We remind that the government has proposed a revision of the 2014 budget, which envisages raising the deficit target to 3.9% of GDP. The parliament’s finance and budget committee started debates on the revision on Monday (Aug 25). The discussions must be completed within 10 days. As many as 236 amendments to the originally proposed budget revision have been submitted.

Total budget revenues increased by a real 0.9% y/y to MKD 81.4bn in Jan-July 2014, and total budget expenditures rose by a real 2.0% y/y to MKD 96.9bn.

In July alone, the budget reported a deficit of MKD 681mn, up from a deficit of MKD 510mn in July 2013. Total budget revenues dropped by a real 12.7% y/y to MKD 12.9bn last month, and total budget expenditures contracted by a real 11.1% y/y to MKD 13.6bn. The fall in revenue was driven by non-tax revenues, which decreased by a real 69.8% y/y to MKD 815mn in July 2014.

On the other hand, tax revenues expanded by a real 2.1% y/y to MKD 7.8bn in July. Positive real annual growth was reported for personal income tax (up 16.5% to MKD 1bn), profit tax (up 47.7% to MKD 423mn) and VAT (up 5.4% to MKD 4.5bn). Revenues dropped y/y in real terms for excises (down 0.7% to MKD 1.5bn), import duties (down 11.6% to MKD 313mn) and other taxes (down 81.4% to MKD 69mn).