Parliament approved in principle the draft budget of 2023, which according to Prime Minister Edi Rama is double the budget of 2013, when the socialists took power. From a verification of Faktoje, it appears that the statement of the head of the government is partially true. Economic experts say that real comparisons between two budgets are made when the influencing factors are mentioned, not only in nominal terms as Rama claims.

Esmeralda Topi

“We are finalizing next year’s budget, which is double the 2013 budget, which shows that many things have changed positively in terms of the country’s future.” – declared Prime Minister Edi Rama three days before the approval of the most important financial document of the year in the government.

NOMINAL BUDGET 2023 2013 (AN) Change in value Change in %
TOTAL INCOME          631,711          325,918                           305,793 94%
TOTAL EXPENDITURE          687,209          409,408                           277,801 68%

To verify the Prime Minister’s statement, Faktoje made a comparison of the 2023 draft budget with that of 2013.

Comparison table with the values of the 2012 and 2023 budget from Faktoje

If we compare the values of income and expenditure, their nominal increase is 94% for income and 68% for expenditure. The Prime Minister refers certainly to these figures when making the 10-year comparison. But hides behind them?!

Economy and finance experts say that in order to make a real comparison, the influencing factors must be mentioned.

Budget revenues and expenditures are indexed at the rate of nominal GDP [1] , so they increase whenever the economy in nominal terms (real growth + prices) grows. There are other factors influencing incomes for which the government is evaluated; changes in the fiscal burden as a result of fiscal policies and the expansion of the taxpayer base, including the fight against evasion. In 2014 and following, the government has increased the tax rate from 10% to 15% for a large group of incomes, and introduced progressive taxation on wages up to 23%. Based on these factors, the increase of incomes would be minimal.

Expenses, on the other hand, are subject to certain elements of income increase and the level of fiscal space or their goals, such as the strategy on the level of public debt, and development and social policies, such as increased investments in education, health, and infrastructure intended to increase competitiveness and rates of economic growth and income. Likewise, if budget expenditures are indexed in the same way as income, then the increase would be only 2.4%.

“For the evaluation of the budget in different periods of time, it is good to take into consideration the factors related to the performance of the economy. It means that even without the government doing anything, as far as the economy grows, the premises for the budget to increase are already there anyway.

The second thing is to look at the fiscal policies followed, and a concern of this entire decade is that the tax on labor has increased, while the tax on capital has remained the same.

The budget is also evaluated by checking where the money invested by the public sector ends up. Judging by absolute numbers, ignoring the determining factors, does not lead to conclusions, it is populist and does not express the social economic reality of the country.” – argues for Faktoje, former Minister of Economy Zef Preçi.

In the table below, Faktoje has presented the level of budget revenues and expenses for the years 2013 and 2023 in relation to the respective GDP of each year.

BUDGET AS % of GDP 2023 2013 (AN) Change in %
TOTAL INCOME          631,711          325,918 94%
TOTAL EXPENDITURE          687,209          409,408 68%
GDP ACCORDING TO IMF 2,176,657 1,350,053 61%
TOTAL REVENUE (% of GDP) 29% 24.1% 20%
TOTAL EXPENDITURE (% of GDP) 32% 30% 4%

The analysis shows that income as a percentage of GDP has increased by about 5% of GDP. This means that the income has increased by about 20%, regardless of the GDP level. Meanwhile, public expenditures as a percentage of GDP have increased by about 2%. This means that spending has increased by just 4% in 2023 compared to 2013, not considering the GDP.

Even a detailed analysis on the change of state budget balances in the last 10 years by Altax Research Center points out that the comparison becomes real when macro-fiscal influencing factors are considered.

“The impact of economic growth in these 10 years is at least 25.8%. The impact from inflation is 24.8% and the impact from administration and investments in good administration is calculated at 78.6%. But if we subtract the effect from inflation and economic growth, as well as the impacts factored in the fiscal policy, we see that the real impact is 28%.”

This analysis is also supported by the calculations made by Faktoje in the table below, where the level of expenses and income was calculated by deducting the effect of price changes (inflation).

This follows the logic that with one lek in 2013 you could buy more things than what you can buy with one lek in 2023. The increase in prices based on the data of the World Economic Outlook of the IMF for this period is about 27%.

BUDGET CHANGE IN REAL TERMS 2023 2013 (AN) Change in %
TOTAL REVENUE (Current prices)          631,711          325,918 94%
TOTAL EXPENDITURE (Current prices)          687,209          409,408 68%
INFLATION INDEX 122.812 96.608 27%
TOTAL REVENUE (2023 prices)          631,711          414,320 52%
TOTAL EXPENDITURE (2023 prices)          687,209    520,456.02 32%

If we deduct incomes and expenses from the effect of price changes, comparing values with the same purchasing power, it turns out that incomes have increased by 52% during these ten years and expenses by 32%, influenced by the elements of real economic growth and those of administration and public policies.

[1]GDP considered with the production method until 2021. For the year 2022 and 2023, we have calculated real growth + inflation declared by the Government.