Three scenarios for the Coronavirus effects on the state budget and its revenues, envisaging revenue decline from 40% to 65% in relation to the previous year. At a press conference on Wednesday, Minister of Finance, Nina Angelovska, announced the revenue performance in March – the first month in which the effects from the Coronavirus crisis started to be felt, as well as the possible outcome for this year.
She underlined that the Budget was in good condition at the start of the year, liquidity was in excellent condition in the first two months, as well as at the beginning of March. Collection of budget revenues was by 4.6% and by 4% higher in January and in February respectively compared to last year, performance which was within the projection.
– Undertaking measure to prevent the spreading of COVID-19, and putting the health of the citizens first, reduced the economic activity, which expectedly started to reflect on the Budget. Starting 20th March, when the effects from the measures undertaken to prevent the spreading of the Coronavirus started to be felt, sharp decline of tax revenues by around 25% per day was observed. This led to decline of total tax revenues by 11% in March compared to the previous year. It is a result of the decreased collection by 17% of VAT revenues, by 11% of excise revenues and by 11% of profit tax revenues, despite the early advance payments by the socially responsible companies in the light of assistance for the Coronavirus crisis, Angelovska said.
The Minister said that the Ministry of Finance prepared several scenarios on the outcome of the Coronavirus crisis, i.e. how this crisis would influence the budget revenue performance in 2020. She pointed out that the deficit financing need would depend on how much revenue collection would decline.
– As for the first scenario, favourable – 20% decline of revenue collection in the consolidated budget is forecasted in relation to the projections. It would mean a decline in revenues by around EUR 700 million – meaning that the deficit and the deficit financing need would increase by the same amount. The second scenario, unfavourable – decline in budget revenues would be around 30%, the deficit financing need would thus increase by around EUR 1 billion. The third scenario, least favourable – should the revenue collection drop by 40%, the deficit financing need would amount to around EUR 1.3 billion. It is important to be prepared for the worst scenario, but to certainly undertake measures and take adequate steps for the best. Vigilant monitoring, agility and flexibility of governments are key to tackling and dealing with this shock to both the healthcare system and the economy, Angelovska said.
As for the expenditure side, Angelovska pointed out that despite the envisaged increased needs of the healthcare system, and the economic measures to be undertaken to mitigate the blow on the economy – all scenarios envisaged almost full execution of the expenditures in terms of amount, i.e. expenditure execution to amount to EUR 3.9 billion as projected. However, as the Minister said, structure of expenditures will significantly change, by reallocation between budget items to the end of additionally securing the healthcare system above all, followed by implementation of the economic measures to reduce/mitigate the Coronavirus impact.
– We are working on scenarios for financing each of these three scenarios. Unpredictability and vulnerability of the capital markets pose a great challenge on designing these scenarios. As we have already informed, procedure for providing funds from the International Monetary Fund, the World Bank and the bridge-to-bond facility is ongoing. These funds are expected to be provided by May, Angelovska said.
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