2018 Draft Budget presented to citizens associations, businessmen, unions and journalists

2 November 2017, Skopje - For the first time, Ministry of Finance involves the civil society, the unions and the businessmen in the budget adoption process. Today, a public debate was hold in the Ministry of Finance, during which the 2018 Draft Budget was presented.

2018 Budget is projected upon assumption for real GDP growth at 3.2%, which is expected to reflect the continuous solid personal consumption, intensification of investments and increase in export. GDP projection is the same with the autumn projections of the relevant international institutions such as the IMF and the World Bank.

Inflation rate in 2018 is expected to account for 1.7%, manly under the influence of global prices.

As for this year, Ministry of Finance revised the projection on economic growth at 1.6% of GDP, being in line with the autumn projections of the relevant international institutions, such as 1.9% according to IMF, and 1.5% according to the World Bank. Budget deficit is expected not to exceed 2.9% of GDP this year.

Total budget revenues for 2018 are projected at Denar 193.5 billion, i.e. by 4.7% higher than 2017. Expenditures are projected at Denar 211.7 billion, i.e. higher by 4.1% compared to 2017. Budget deficit is projected at Denar 18.2 billion or 2.7% of GDP, i.e. it reduced by 0.2 percentage points compared to 2017. In the medium run, gradual fiscal consolidation is planned, i.e. strict control of less productive expenditures, at the same time providing a significant level of capital investments and subsidies aimed at supporting the national economy.

Financing of budget deficit is planned from domestic and foreign sources, depending on the market conditions.

Most of the expenditures are intended for pensions, social care and child protection, accounting for 32% of the total expenditures, 19% of the expenditures are intended for economic development and financial affairs, 14% is allocated for the health sector, 11% is planned for education, science and sports, 5% is planned for construction, transport and ecology, agriculture and public order and safety each, 3% is intended for defense, 2% is projected for both foreign affairs and EU integration and culture, while 1% of the expenditures is planned for the judiciary and regional development each.

Capital expenditures are projected in the amount of Denar 24.7 billion, i.e. growth of Denar 1.3 billion more compared to the 2017 Supplementary Budget. Hence, intensification of all activities is planned, being related to the road and the railway infrastructure, utility and energy infrastructure, investments in the field of health, education and child protection ,and the funds for defense and gasification are especially increased.

As for capital expenditures, the funds are planned for completing the Road Section Demir Kapija-Smokvica, reconstruction of Corridor 10, construction of the railway line along Corridor 8, reconstruction of Railway Section Bitola-Kremenica and construction of Gradsko-Drenovo Road Section, for which Denar 3.5 billion have been planned.  Denar 5.9 billion has been planned for the utility infrastructure, such as construction of National Gasification System, water supply and sewerage, wastewater treatment stations and equal regional development. Denar 431 million is projected for investments in TIDZ. Denar 2.4 billion is projected for constructing kindergartens, sports facilities, primary and secondary schools, universities and student dormitories, Denar 1.9 million is allocated for investments in the field of health, Denar 1 billion is intended for investments in the field of defense, Denar 531 million is projected for the judiciary and Denar 917 million is planned for the public order and safety.

In 2018, no significant tax changes are planned. Excise for the oil is planned to be increased by Denar 3 with expected multiple effects to the end of higher budget revenues for financing new expenditures, harmonization with the European standards and the EU regulations and environmental protection. Expected outcome is higher both excise revenues by Denar 1.6 billion and VAT revenues by Denar 350 million.

Citizens' associations pointed out that the Budget includes development component, if one takes into account the high level of capital investments, adding that the country should be committed to as greater as possible execution of capital expenditures. Minister of Finance Dragan Tevdovski stressed that projections on capital expenditures are real, and he expects for them to be realized.

Unions asked how the Government will help in increasing the salary level. Minister pointed out that measures have been already undertaken, being aimed at increasing the general level of salaries by increasing the minimum salary, and that as of next year, the salaries in the most important segments of the society, i.e. the education and health sectors, will be increased. Minister of Finance also stressed that the economic growth will contribute to increasing the salaries in all sectors.

Businessmen requested funds for Blace-Skopje Road, more funds for equal regional development and transparent reporting on the tax reforms, so they will be able to prepare themselves therefor. Minister of Finance Tevdovski reply was that the implementation of the tax reforms will commence as of 1st January 2019, and in the meantime, the businessmen and the public will be informed on the planned changes and they will be involved in the respective debate.

You can download the presentation for the 2018 Draft Budget at the following link.