4th May 2020, Skopje – Revenue collection in April surged by Denar 1.4 billion in relation to the most optimistic scenario on revenue performance amid COVID-19 crisis. Compared to last year, collection of revenues dropped by 4.9% from the beginning of this year. According to the baseline scenario of the Ministry of Finance regarding the economic performance in 2020, economic activity is envisaged to slow down by 3.4%, whereby effects from the Coronavirus crisis on the economy are expected to be felt the most in the second quarter, with economic activity contraction slowing down in the third quarter, while economic recovery and growth are expected in the fourth quarter. This was announced by the Minister of Finance, Nina Angelovska, and Deputy Minister of Finance, Shiret Elezi, at the press conference on Monday.
Budget revenues in April amounted to Denar 14.2 billion, dropping by 20% compared to April last year, tax revenues amounted to Denar 7.2 billion, decreasing by 31% in relation to last year, while contributions were collected in the amount of Denar 5.5 billion, being at the same level as in 2019.
-Taking into account the restrictive measures aimed at protecting the health of the citizens, halted economic activity or disruption of some of the supply chains, decline on the revenue side is expected. However, under the baseline scenario prepared by the Ministry of Finance at the beginning of the Coronavirus crisis, the so-called more favourable scenario, higher decline in April (40% decline of tax revenues) than the actual one was projected. This means that revenue collection is higher by Denar 1.4 billion compared to the projections for April amid Coronavirus crisis, i.e. our developed scenario was more conservative or more cautious, Angelovska said.
The highest overperformance is registered at the profit tax. Out of the total revenues collected in the amount of Denar 1.43 billion on the basis of profit tax in April, Denar 790 million is collected from profit tax paid on the basis of annual tax balance, which is a positive data speaking in favour of the successful performance of the companies last year.
As regards the expenditure side in April, total expenditures were executed at almost the same level as last year, i.e. 0.7% increase.
Current expenditures are also executed at the same level as in 2019. With respect to goods and services, 36.5% decrease was registered in relation to April last year. Regarding transfers, expenditure execution was higher by 7%, mainly due to social transfers, i.e. the pension increase which took place this year. Capital expenditures in April were higher by 15.7% compared to April 2019.
Since the beginning of the year by April inclusive, budget revenue collection was higher by 4.9% compared to the same period last year. Tax revenue collection dropped by 9.1% in relation to 2019, mostly due to VAT collection decline by 14.6%. Contribution collection grew by 9.2% compared to last year.
-Contribution collection increased by 9.2% in relation to last year, indicating a great start of 2020 with increase in both number of employees and wages. The wage subsidy measure, applied by more than 22,000 companies which increased the wages of around 120,000 employees, played an important role in the wage increase. Total revenues accounted for 27.3% as per the projections, while total expenditures accounted for 30.4%, Angelovska said.
Deputy Minister of Finance, Shiret Elezi, underlined that due to the lower collection of budget revenues amid the Coronavirus crisis, servicing the needs, as well as the measures to support the business sector, funds were being provided from the international financial institutions.
-We have turned to the international financial institutions, the IMF and the World Bank, which have already approved the first package of financial support. IMF has already approved and disbursed EUR 176 million, the World Bank will extend EUR 140 million and the European Union will provide EUR 160 million, Elezi said.
With respect to the measures, Elezi said that series of credit lines were approved through the Development Bank of North Macedonia, COVID 1 and COVID 2, i.e. 631 loan applications were approved. The third stage of credit lines is also announced, and approval of EUR 51 million through the European Investment Bank is expected, to be made available through the Development Bank of North Macedonia, i.e. the commercial banks.
Minister of Finance pointed out that on the basis of the performance in March and April, as well as the projections for the global economy and our major trading partners, the picture is clearer now and projections on economic growth can be made according to the baseline scenario.
-Even the highly developed economies, such as the USA, Germany, expect significant slowdown of their economies this year, i.e. negative economic performance. IMF projections for these economies are 5.9% and 7% respectively decline of their economic activity, and 7.1% decline for the European Union as a whole. As for the Macedonian economy, IMF projected 4% slowdown at the beginning of April. At the end of April, the World Bank projected economic activity to drop from 1.4% to 3.2% of GDP, i.e. from a more optimistic to more undesired scenario. Baseline scenario of the Ministry of Finance projects 3.4% slowdown of the economic activity, hence the effects from the Coronavirus crisis are expected to be felt the most in the second quarter, economic activity contraction slowing down in the third quarter, while economic recovery and growth are expected in the fourth quarter, Angelovska said.
Expectations by component of GDP are that export component will experience a decline by 16.8% in real terms. Health protection measures, which have already had effects and will continue to have effects on the services sector, the transport sector, the hospitality industry, tourism sector, “art, entertainment and recreation” activity, sales of durable consumer goods, as well as on part of the industrial capacities and the construction activity, will reflect on both the consumption and the investments.
Public consumption is expected to have a positive input, mainly as a result of the increased expenditures for the health sector, experiencing 2.7% growth. Import demand, in conditions of expected decline of the export activity, the investments in capital goods/durable consumer goods by both the business entities and the households, is projected to drop. Hence net export demand, in conditions of higher decline, in absolute terms, of import than export of goods and service will partially neutralize the negative contribution of the domestic demand on the economic activity.
Inflation rate in the country was 0.6% in the first quarter of 2020, indicating downward deviation in relation to the projected inflation. Projection for the foreign effective inflation in 2020 is revised downward. At the same time, price developments on the global stock exchange, i.e. import prices, are expected to cause a downward pressure on the domestic prices. Taking this into account, as well as the expected negative production gap, inflation rate in the country is projected at – 0.2% for 2020.
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