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 |
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