Montenegro’s budget gap expanded 3.1% to EUR 195.6mn in 2012 due to falling budget revenue and activation of state guarantees to the aluminium smelter KAP in April 2012, according to a report on the 2012 budget execution published on the government’s website. The report was approved by the government during its regular session on June 13. The government thus revised upwards its 2012 budget gap estimate from EUR 164mn or 4.9% of GDP previously.
The budget gap to GDP ratio remained broadly unchanged at 5.86% of GDP in 2012 compared to the year before, as the country’s economy contracted 0.5% in 2012. However, it overshot significantly the official target of 3.3% of GDP (EUR 190mn, following budget revision in mid-2012).
Total financing needs, including budget deficit and debt repayments stood at EUR 331mn, up from EUR 322mn a year earlier.
Budget revenue dropped 0.7% to EUR 1.12bn due mainly to declining VAT proceeds (down 9.6% to EUR 355mn). Revenue accounted for 97.5% of the annual plan and for 33.6% of GDP.
Expenditures also edged down 0.2% to EUR 1.32bn (39.4% of GDP) mainly due to capital expenditures’ cuts (down 30% to EUR 59mn). Current expenditures rose 1.9% to EUR 1.3bn on the back of higher wages and goods and services spending. Expenditures exceeded the full-year plan by 5.3%.
In 2013 the Montenegrin government plans to trim its budget gap to 2.7% of GDP, by rising taxation (VAT and personal income tax) and improving budget revenue collection. The IMF recently said that additional austerity measures are needed to curb the country’s rising public indebtedness (at over 50% of GDP).
|Montenegro's state budget, EUR mn||2011||2012||Plan||y/y,%|
|--Personal income tax||81.6||82.3||81.5||0.8|
|--Corporate profit tax||36.1||64.0||46.9||77.3|
|--Wages and contributions||371.3||374.7||376.6||0.9|
|--Goods and services||104.0||153.7||146.7||47.8|
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