Montenegro’s 11-mo budget gap narrows 20% y/y to EUR 122mn

By bne IntelliNews January 8, 2014

Montenegro’s budget deficit shrank 19.9% y/y to EUR 122mn in January-November 2013, as stronger revenue growth offset a milder increase in expenditures, data from the finance ministry showed. The 11-month budget deficit equalled to 3.5% of the full-year GDP projection, down from 4.6% of GDP a year ago, according to IntelliNews calculations.

Total budget revenue grew 9.9% y/y to EUR 1.1bn in January-November thanks to higher tax collection. VAT revenue climbed 18.3% y/y to EUR 389mn due to the VAT rate hike from 17% to 19% in July. Social contributions, likewise, increased by 8.2% y/y to EUR 338mn.

The 11-month budget expenditures rose by 6% y/y to EUR 1.2bn, lifted by higher current expenses and additional spending related to the bankrupt aluminium smelter KAP. Current expenditures increased by 7.3% y/y to EUR 1.17bn in January-November due to rising interest and public sector transfers. Capital expenditures remained in the red, shrinking 19.8% y/y to EUR 44.4mn in January-November.

The January-November budget gap was by 10% higher than the plan for the period, already exceeding the full-year target of EUR 95mn (2.7% of GDP) due to the payment in August of EUR 103mn of state guarantees on KAP's loans. In response, the government has said the full-year gap might reach EUR 151.9mn, or 4.6% of the GDP.

In 2014 Montenegro hopes to lower its budget deficit to EUR 71mn (1.99% of the full –year GDP forecast) thanks to improved economic activity and higher tax revenue. The economy is projected to grow by 3.6% this year, up from anticipated 2.6% in 2013.

Montenegro budget, EUR mn Jan-Nov'12 Jan-Nov'13 y/y,% deviation from the plan, %
Total revenue 994.1 1,092.7 9.9 5.0
Tax revenue 628.9 683.5 8.7 6.3
--VAT 328.9 389.0 18.3 12.4
--Personnal income tax 71.5 80.1 12.0 1.2
--Excises 133.9 148.3 10.7 2.9
Social contributions 312.6 338.3 8.2 1.8
Total expenditures 1,146.3 1,214.7 6.0 5.5
Current expenditures 1,091.0 1,170.3 7.3 7.3
--Goods and services 129.2 72.3 -44.0 -2.3
--Salaries and wages 343.4 337.6 -1.7 -1.0
--Interests 53.1 62.3 17.3 -3.5
--Subsidies 21.1 13.4 -36.3 2.9
--Social security transfers 439.2 441.2 0.5 /
--transfers to institutions, individuals, NGOs and public sector 25.3 76.5 202.4 /
Capital spending 55.3 44.4 -19.8 -26.2
Repayment of guarantees 24.0 106.7 344.9 /
Budget balance -152.3 -122.0 -19.9 10.0
Source: Finance ministry        

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