Albanias general budget deficit edges down 1% y/y in 2012.

By bne IntelliNews February 27, 2013
Albanias general budget deficit shrank by 1% y/y to ALL 45.4bn (EUR 325mn) in 2012, finance ministry data showed. In our calculations, the cash-based deficit accounted for 3.3% of the projected full-year GDP, down from 3.5% a year earlier. Total budget revenues declined by 0.2% y/y to ALL 329.8bn, reflecting a 1% y/y drop in tax revenues. This was partly offset by a 1.4% y/y rise in total social contributions as well as by a 5.5% y/y increase in non-tax revenues. Regarding tax receipts, the combined revenue from indirect taxes fell by 4.4% y/y, as excise revenues declined by 9.9% y/y, VAT was down by 2.2% y/y and customs duties edged down by 0.7% y/y. Lower revenues from indirect taxes signals for a continued stagnation of the domestic consumption. Corporate tax revenues dropped by 14.5% y/y on lower profits of companies. On the expenditure side, total budget spending declined by 0.3% y/y, which was exclusively due to lower capital expenditure, down by 14.2% y/y. The latter accounted for 86.8% of the full-year plan. By contrast, current spending increased by 2.3% y/y, pushed up by higher social outlays. The government expects the budget gap to account for 3.5% of the GDP in 2013. The government has already decided to remove VAT on cement and steel used for the construction of hydropower plants and expressed commitment to scrap the VAT on imported machinery and equipment, used in agriculture production. Another major tax reform, approved by the cabinet in January, concerns the personal taxation. This includes the introduction of a non-taxable minimum of ALL 30,000 (EUR 215.2) per month for personal income. Currently, Albania taxes personal income with a flat tax rate of 10%. Although the authorities have not provided estimates on the effect of these measures on the budget, they are expected to cause additional pressure on the revenue side in the course of 2013.
General Budget, ALL bn
2011 2012 % y/y
Total revenues 330.5 329.8 -0.2
VAT 119.2 116.5 -2.2
Corporate profit 19.7 16.9 -14.5
Excise 40.4 36.4 -9.9
Personal income 28.0 28.0 0.1
National 21.4 28.7 34.1
Customs duties 6.9 6.1 -10.7
Total social contributions 56.6 57.4 1.4
Social insurance 48.8 49.5 1.4
Health insurance 6.2 6.6 7.1
Non-tax Revenues 22.7 24.0 5.5
Total expenditures of which: 376.3 375.2 -0.3
Current 305.6 312.6 2.3
Capital 70.7 60.6 -14.2
Balance -45.8 -45.4 -1.0
Balance (% of GDP forecast) -3.5 -3.3
Source: Ministry of finance
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