Three debt scenarios

22/09/2011 21:10

This year, the government debt will face three scenarios that depend directly from the economic progress.

The government has officially predicted an economic growth of 5% for this year. According to this version, the country’s public debt goes to 59.4% of the GDP by the end of this year.

But this is the most optimistic scenario, compared to the two others. Two days ago, the IMF assessed that the economic growth in the country might be twice lower than what the government has declared, only 2.5%.

If this prediction will be true, Albania’s public debt, for the first time since 2005, will cross the limit of 60% that the Parliament has set with law.

These are the two scenarios, both on the edge of the extreme, based on the optimistic government predictions and the conservatory ones by IMF.

But there is a third scenario too, which in the current conditions seems the most probable: that of Bank of Albania. The Bank declared that the economic growth for 2011 will be same as last year’s, around 3.4%.

With this scenario, the government debt goes to 59.8%, in the limits of the legal law. Chances are that this year, the government’s debt will be higher than the official budget number.

The low economic growth has made even more difficult for the government to keep its obligations under control, maneuvering them on the edge of the maximal limit of 60%.

This situation is obliging the government to reduce expenses, especially on public investments. In August, for compensating the revenue decrease, the government invested half of the predicted sum in economy.

The scenario of a lower economic growth and of weaker revenues could impose greater cuts in the investments for the next months, as it has happened in the other years. The sectors that will suffer more cuts are education and health.

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