Montenegro’s budget gap narrows 9.6% y/y to EUR 24mn in Jan 2014 on higher tax proceeds

By bne IntelliNews February 25, 2014

Montenegro’s budget deficit shrank 9.6% y/y to EUR 23.5mn in January 2014, as revenue increased markedly over the period whereas expenditures were lower than expected, data from the finance ministry showed. The budget deficit equalled to 0.7%% of the full-year GDP projection, down from 0.8% of GDP a year ago, according to IntelliNews calculations.

The January budget gap was also by 52.0% lower that the plan for the period due to lower-than-planned spending on goods and services and social, employment and capital expenditures.

Total budget revenue grew 29% y/y to EUR 70.6mn in January thanks to higher tax collection. VAT revenue climbed 29.4% y/y to EUR 32.2mn due to the VAT rate hike from 17% to 19% in July 2013. Social contributions, likewise, grew 50.8% y/y to EUR17.6mn due to higher pension’s contributions.

The January budget expenditures rose by 16.5% y/y to EUR 94.1mn, lifted by higher current spending. Current expenditures increased by 14.7% y/y to EUR 92.5bn in January on the back of rising salaries and wages, goods and services and social security expenses. Capital expenditures grew to EUR 1.7mn in January from EUR 0.1mn a year ago but remained below the plan for the period.

In 2014, Montenegro hopes to lower its budget deficit to EUR 71mn (1.99% of GDP) from EUR 128mn (3.9% of GDP) a year ago, 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.

Last year the budget deficit exceeded by 34.6% the official full-year target of EUR 95mn (2.7% of GDP) due to the payment in August of EUR 103mn worth of state guarantees on bankrupt aluminium smelter KAP's loans. The uncertain future of the aluminum smelter continues to weight on the country’s budget execution.

Montenegro budget, EUR mn Jan'14 Jan'13 y/y,% deviation from the plan, %
Total revenue 70.6 54.8 29.0 13.1
Tax revenue 48.4 38.7 25.2 3.8
--VAT 32.2 24.9 29.4 17.8
Social contributions 17.6 11.7 50.8 50.6
Total expenditures 94.1 80.8 16.5 -15.5
Current expenditures 92.5 80.7 14.7 -10.2
--Salaries and wages 31.7 31.0 2.3 -1.6
--Goods and services 3.7 3.5 5.1 -50.1
--Social security transfers 39.6 38.2 3.7 -4.7
Capital spending 1.7 0.1 1102.9 -80.4
Repayment of guarantees 5,13 0.0 / /
Budget balance 23.5 26.0 -9.6 -52.0
Source: Finance ministry        

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