Gov’t’s Macro Fiscal Framework 2018-2020 eyes investment at 4.6% of GDP

Albania’s medium-term fiscal policy for the 2018- 2020 period will be oriented towards fiscal consolidation, and it is expected to provide an optimal level of investment at around 4.6 percent of GDP (including the investments of the Regional Development Fund, as well as investments in the energy sector financed from the state budget).

Fiscal consolidation and public debt reduction is essential in reducing the risks from debt, which hinder growth and cause macroeconomic instability.

These are the main principles that the Ministry of Finance has programmed in its Macro Financial Framework 2018-2020, a document that has already been approved by the government.

This fiscal framework aims at an overall fiscal deficit of 1.8 percent of GDP for 2018, from 2.0 percent projected for 2017; a level of 1.0 percent of GDP in 2019; and 0.6 percent in 2020.

According to this document, the government will target a continuous positive primary balance and growth for the period 2018-2020, respectively 1 per cent by 2018, from 0.7 percent targeted in the 2017 budget; 1.8 percent in 2019; and 2.3 percent in 2020.

This fiscal consolidation will enable the level of public debt in relation to GDP to continue the downward trajectory started in 2016.

The public debt is expected to fall to around 66.3 percent of GDP in 2018, to 62.8 percent in 2019 and then to 59.6 percent in 2020.

At the same time, this fiscal framework includes a series of budget policies to support growth and to compensate the tightening effects of fiscal consolidation.

Public investment in the short and medium term are expected to be kept at the level of at least 4.6 percent of GDP, which is important to feed the aggregate demand in the short term and to shift the economic growth at a higher level in the medium and long term.

SCAN

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