Montenegro’s Jan-Oct budget gap narrows 16% y/y to EUR 116mn, exceeds annual target

By bne IntelliNews November 21, 2013

Montenegro’s budget deficit narrowed by 15.7% on the year to EUR 115.5mn in January-October 2013, as stronger revenue growth offset a milder increase in expenditures, data from the finance ministry showed. The ten-month budget deficit equalled to 3.5% of the full-year GDP projection, IntelliNews calculations based on the latest finance ministry's full-year projection showed.

Nevertheless, the January-October budget gap was by 12.4% 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 bankrupt aluminium smelter KAP's loans. In response, the government has said the full-year gap might reach EUR 186.9mn, or 5.3% of the GDP.

Total budget revenue rose 9.7% y/y to EUR 997mn in January-October underpinned by higher tax collection. VAT revenue climbed 18.6% y/y to EUR 356mn, accounting for 36% of total budget income. The increase reflected the VAT rate hike from 17% to 19% in July. Social contributions also went up by 8.7% y/y to EUR 308mn (31% share in total).

The ten-month budget expenditures grew by 6.4% y/y to EUR 1.1bn, lifted by higher current expenses and KAP-related spending. Current expenditures increased by 7.9% y/y to EUR 1.08bn in January-October due to rising interest, social security spending and public sector transfers. On the other hand, capital expenditures continued retreating, shrinking 25.6% to EUR 36mn over the period. They accounted for just 3.3% in total budget expenses in January-October, down from 4.7% a year ago.

The Montenegrin government is expected to approve soon the 2014 budget drat which will target a budget deficit of EUR 66mn (1.89% of the full –year GDP forecast) considerably below the estimated EUR 187mn (5.3% of GDP) budget gap in 2013. The EBRD warned in its latest Transition Report issued on Nov 20 that the Montenegrin government will not be able to find a sustainable solution to the widening fiscal gap unless it resolves the liabilities of KAP.

Montenegro budget, EUR mn Jan-Oct'12 Jan-Oct'13 y/y,% deviation from the plan, %
Total revenue 908.8 996.9 9.7 5.7
Tax revenue 578.0 626.5 8.4 6.8
--VAT 299.8 355.5 18.6 13.1
--Personnal income tax 65.2 72.8 11.7 2.4
--Excises 121.4 135.2 11.3 2.4
Social contributions 283.5 308.0 8.7 3.7
Total expenditures 1,045.8 1112.4 6.4 6.3
Current expenditures 996.9 1076.1 7.9 8.5
--Goods and services 117.0 65.4 -44.1 -2.2
--Salaries and wages 312.2 306.6 -1.8 -1.1
--Interests 522.2 618.1 18.3 5.3
--Subsidies 203.6 112.5 -44.8 -5.5
--Social security transfers 398.8 400.1 0.3 -3.6
--transfers to institutions, individuals, NGOs and public sector 23.2 71.7 208.5 -6.5
Capital spending 48.8 36.3 -25.6 -33.6
Repayment of guarantees 24.0 103.1 330.1 /
Deficit/Surplus -137.0 -115.5 -15.7 12.4
Source: Finance ministry        

Related Articles

Freedom House keeps “partly free” status for Macedonia despite new government’s efforts

Macedonia was rated only “partly free” in the latest report from international watchdog Freedom House, the same almost all of the six Western Balkan countries, despite efforts by the ... more

Milo Djukanovic leads poll ahead of Montenegro’s presidential election

Veteran politician Milo Djukanovic has the highest chance of becoming Montenegro’s next president in the 2018 ... more

Veteran Montenegrin politician Milo Djukanovic to run for president in 2018

Montenegro’s ruling Democratic Party of Socialists (DPS) will most likely propose its veteran leader, former president and prime minister Milo Djukanovic, to ... more