Skopje, 16th November 2015 (MIA) – At its plenary session held today, Parliament of the Republic of Macedonia commenced the debate on the 2016 Draft Budget, including the amendments, as well as the Government’s modifications.

Deputy Prime Minister and Minister of Finance, Zoran Stavreski, said that basis for budget preparation was the performance of the Macedonian economy in 2015 and the projections of the Ministry of Finance, as well as the EC, the IMF and the World Bank on the European and the global economy, including the Macedonian economy in 2016.

As regards the 2015 performance, he said, Macedonian economy has continued the upward trend, reaching 2.9% growth in the first half of the year, thereby keeping the other macroeconomic fundamentals which place the Macedonian economy among the more successful in Europe. In the light of this context he pointed out the maintenance of moderate level of indebtedness, price stability and stability of the banking sector, as well as the unemployment reduction.

2.9% economic growth in 2015, in conditions of serious political crisis in the country, and European crisis as a result of the negotiations between Europe and Greece, Stavreski said, is yet another strong indicator of Macedonian economy’s resilience and well-founded economic policies. He expects for growth to reach more than 3% by the end of this year.

As he said, reports of the international financial institutions also confirm this. Hence, EBRD has announced this month that it expects for Macedonia, together with Montenegro, to achieve the highest economic growth of 3.5% in SEE. Similar forecasts of 3.2% come from the World Bank, the IMF and the EC.

Investments and export were growth driving force this year, like in the previous years. As regards private investments, foreign companies, as well as investments in the domestic private sector, have contributed the most, mainly in the traditional export sectors, thus providing for investment rate in 2015 to reach 30% of GDP, being historically the highest level of investments. With respect to public investments, the most important ones are the capital investments projected in the Budget, which have provided for underpinning the national economy, i.e. growth in the construction sector and the industry, as well as the services sector. Industrial production in the first nine months experienced 2.5% growth, and it was the most affected by the political crisis, while negative results were observed therein in the second quarter this year.

– It is good that, in August and September following the conclusion of the political agreement, the industry experienced positive trends, growing by 12.7% in August and by 8.7% in September, meaning that stability and trust in the institutions, as well as political stability, are being regained, Deputy Prime Minister Stavreski said, adding that growth was reached in the production in the free economic zones on one hand, and in the traditional industrial sectors in Macedonia on the other.

As for the second growth component – the export, it grew by 8.9% in the first nine months, as a result of the good performance by the companies in the free economic zones. Total export from these zones amounts to EUR 1.205 billion, being by 27% more compared to the same period last year. These companies comprise 36% of the Macedonian export. It is important, Stavreski underlined, that export structure has also changed, which the Government has strived for, towards products with higher value added, such as spare parts in the automotive industry, electrical components, transportation vehicles – buses.

This transformation of the Macedonian export, he said, will be the basis for growth in the coming years as well. Macedonia, as he said, is one of the rare countries with surplus in the trade with Germany, amounting to more than one billion euros. This means that we export to a very fastidious marketplace, which is exceptionally positive for Macedonia.

Trade deficit, Deputy Prime Minister pointed out, continues to narrow and it is lower by 4.6% compared to the same period last year, being fully financed with foreign direct investments.

As Stavreski underlined, positive trends in the economy haве also contributed to historically the lowest level of unemployment rate, which accounted for 26.8% in June, being by 1.4 percentage points lower in relation to the same quarter in 2014. This is a result of the direct government measures, among which “Macedonia Employs” Project, through which 8,965 persons found jobs in the period from April to November. There are 15,500 people working in the free economic zones, 6,470 out of which have been employed in 2015. Employment increase in 2015 is also seen in the manufacturing industry, construction sector, financial services, etc. – Hence, employment rate, as opposed to unemployment rate, has surged by 41.7%, and number of employees has increased to 699,578 persons, being historically the highest employment level in Macedonia, Deputy Prime Minister Stavreski stated.

With respect to foreign direct investments, expectations are that their upward trend will also continue in 2016 with the investments announced in October and November.

Stavreski also talked about the Doing Business Report, according to which Macedonia is ranked 6th in Europe and 12th in the world as regards the business climate. In Europe, it follows after the Scandinavian countries and the Great Britain, and it is better ranked than 24 EU Member States as a result of the Government measures.

As regards the Budget, he said that it was executed in exceptionally complex conditions, however, the budget execution was better than the projections, which was a result of the higher revenue collection, being by 12.3% higher in the first nine months compared to the same period in 2014. Thereby, collection of tax revenues surged by 12.8% or by Denar 7.8 billion.

On the expenditure side, expenditures were higher by 7.6%, due to the increase of the social rights of 10% realized through the payments made in June and the pension increase by Denar 621 or by 5% in average. As a result of such trends on both the revenue and the expenditure side, deficit in the first nine months amounted to Denar 13.8 billion or it was by 20.5% less compared to the respective deficit in 2014.

– This leads to the conclusion that budget execution is good, better than last year … Government debt as of September inclusive amounts to EUR 3.233 billion, i.e. 36% of GDP, while public debt in the same period accounted for 43.9% of GDP, being by 2.1 percentage points lower compared to 2014, when the Eurobond was issued in July and level of public debt reached more than 46%. Hence, public debt level is lower, making Macedonia remain in the sphere of moderately indebted countries, Stavreski said.

Basic projection for 2016, as he said, is that there will be higher level of political stability, which will provide for more favourable climate for the business sector and the citizens, and it will not be an obstacle to better economic performance. EU in 2016 will experience a slightly higher growth compared to 2015, i.e. 2%, while growth in the Eurozone will reach 1.5% which, as he said, will have positive effects on the consumption and the investments in Macedonia.

– Real growth next year is envisaged to reach 4% and it would be one of the higher performances in Europe. Such expectations are also shared by the EU, the EBRD and they all expect for Macedonia to achieve one of the best results in Europe, Stavreski said.

According to the Draft Budget, total expenditures are projected at Denar 195,788 million, being by 4.7% higher compared to 2015, while total revenues are projected at Denar 176,804 million, increasing by 6% in relation to 2015.

Main features of the 2016 Budget, according to the Government proposing the Budget, are lowering the budget deficit from 3.6% in 2015 to 3.2% next year and increasing the funds for pensions, social welfare and capital investments, all to the end of stimulating the development component of the Budget.

As for the revenue side, collection of tax revenues is expected to surge by 6.5%, amounting to Denar 101,531 million, non-tax revenues are envisaged to be collected in the amount of Denar 9,633 million, being by Denar 519 million higher, while collection of contributions is planned to increase by 4.2%, amounting to Denar 49,187 million.

Regarding the expenditure side, in addition to the funds envisaged for higher pensions and social benefits, more funds (by 3.3%) are also envisaged for the salaries or Denar 25,906 million, funds for goods and services are projected at Denar 19,618 million or by 3.5% more compared to 2015, funds are envisaged for the elections in April 2016, as well as for transfers. Denar 1,334 million is envisaged for health protection, increased transfers to local government units for ensuring equal regional development are projected, as well as EUR 141 million as subsidies to farmers. Capital expenditures are projected in the amount of Denar 25,092 million, being higher by 12.9 in relation to 2015.

Economic growth is expected to account for 4% of GDP, while inflation is projected at 2%.

417 amendments to the draft text were submitted. According to the Rules of Procedure of the Parliament of the Republic of Macedonia, 92 amendments to the draft text were considered within the determined 10-day deadline in the course of the debate in the relevant parliamentary commission, whereby 4 amendments were accepted.

The session will resume following the regular break. The debate about the Draft Budget should be completed within five days.

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