Abstract
This 2013 Article IV Consultation for Albania focuses on economic developments and policies that have led to weakening and imbalance of the economy. It highlights that high nonperforming loans (NPLs) are constraining credit growth, and weak external drivers are preventing a sustained reduction in external imbalances. Reduction in NPLs would safeguard financial stability and help release credit supply constraints by lowering bank risk aversion. The authorities have requested a three-year arrangement with proposed access equivalent to SDR 295.42 million.
1. This statement provides information that has become available since the issuance of the Staff Report. The information does not alter the thrust of the staff appraisal.
2. Preliminary data for 2013 indicate that the fiscal deficit was 4.8 percent of GDP, compared to 6.2 percent of GDP in the staff report (Table 1). The improved performance was primarily the result of lower than expected capital expenditure (foreign–financed). Tax revenues were higher than envisaged, particularly VAT. Without a clear sign of a pickup in economic activity, the improved revenue collection is likely to have been from better administration—following resolution of uncertainty associated with elections and change of government. The good revenue performance was partially offset by lower than expected nontax revenues and grants.
Albania: General Government Operations, 2012–13
(Percent of GDP)
Albania: General Government Operations, 2012–13
(Percent of GDP)
| 2012 | 2013 | |||||
|---|---|---|---|---|---|---|
| SR | Prel. | |||||
| Total revenue and grants | 24.9 | 24.0 | 24.2 | |||
| Tax revenue | 22.7 | 21.6 | 22.2 | |||
| Of which: VAT | 8.8 | 8.0 | 8.3 | |||
| Profit tax | 1.3 | 1.1 | 1.1 | |||
| Excise tax | 2.7 | 2.7 | 2.8 | |||
| Personal income tax | 2.1 | 2.1 | 2.2 | |||
| Social insurance contributions | 4.3 | 4.4 | 4.4 | |||
| Non-tax revenue | 1.8 | 1.8 | 1.6 | |||
| Grants | 0.5 | 0.6 | 0.4 | |||
| Total expenditure | 28.4 | 30.1 | 29.0 | |||
| Current expenditure | 23.7 | 24.5 | 24.2 | |||
| Capital expenditure | 4.7 | 5.7 | 4.8 | |||
| Of which: foreign financed | 2.7 | 2.9 | 2.1 | |||
| Lending minus repayment | 0.0 | 0.0 | 0.0 | |||
| Overall balance | -3.5 | -6.2 | -4.8 | |||
| Financing | 3.5 | 6.2 | 4.8 | |||
| Domestic | 2.3 | 5.4 | 4.0 | |||
| Foreign | 1.2 | 1.0 | 1.1 | |||
| Accumulation of Arrears | 0.0 | -0.3 | -0.3 | |||
Albania: General Government Operations, 2012–13
(Percent of GDP)
| 2012 | 2013 | |||||
|---|---|---|---|---|---|---|
| SR | Prel. | |||||
| Total revenue and grants | 24.9 | 24.0 | 24.2 | |||
| Tax revenue | 22.7 | 21.6 | 22.2 | |||
| Of which: VAT | 8.8 | 8.0 | 8.3 | |||
| Profit tax | 1.3 | 1.1 | 1.1 | |||
| Excise tax | 2.7 | 2.7 | 2.8 | |||
| Personal income tax | 2.1 | 2.1 | 2.2 | |||
| Social insurance contributions | 4.3 | 4.4 | 4.4 | |||
| Non-tax revenue | 1.8 | 1.8 | 1.6 | |||
| Grants | 0.5 | 0.6 | 0.4 | |||
| Total expenditure | 28.4 | 30.1 | 29.0 | |||
| Current expenditure | 23.7 | 24.5 | 24.2 | |||
| Capital expenditure | 4.7 | 5.7 | 4.8 | |||
| Of which: foreign financed | 2.7 | 2.9 | 2.1 | |||
| Lending minus repayment | 0.0 | 0.0 | 0.0 | |||
| Overall balance | -3.5 | -6.2 | -4.8 | |||
| Financing | 3.5 | 6.2 | 4.8 | |||
| Domestic | 2.3 | 5.4 | 4.0 | |||
| Foreign | 1.2 | 1.0 | 1.1 | |||
| Accumulation of Arrears | 0.0 | -0.3 | -0.3 | |||
3. Credit to the economy declined by 2.6 percent in November (y-o-y), unchanged from September. The profitability of the banking system remains weak, but provisioning has increased slightly relative to September. Financial soundness data for November indicate that the NPL ratio was unchanged at 24.2 percent of gross loans, the same level as in September. The nominal stock of NPLs fell slightly on a month-on-month basis.