Download Macroeconomic framework for 2008

Fiscal Policy in 2008
Belgrade, November 12, 2007
Contents
• Results achieved in 2007
• Macroeconomic framework and economic
policy objectives for 2008
• Main parameters of the fiscal policy for
2008
• Republic of Serbia’s 2008 budget
• Closing considerations
www.mfin.sr.gov.yu
2
Consolidated balance of the government sector in 2007
• In the first three quarters of 2007, the surplus in consolidated
government sector amounted to 50.6 bln RSD (2.1% of GDP);
• The surplus was created at the level of Republic, local governments
and Pension Fund of Small Businesses, while other fiscal
institutions were balanced;
• If license fee is excluded from the revenues, while repayment of
debt to pensioners and net loans are included in the expenditure,
the surplus amounts to 11.1 bln RSD, or 0.5% of GDP;
• Therefore, fiscal policy in 2007 has not been responsible for
accelerated inflation and growing foreign deficit.
www.mfin.sr.gov.yu
3
Consolidated 9m 2007 state balance
PUBLIC REVENUES
Current revenues
Tax revenues
Personal income tax
Corporate profit tax
Value Added Tax
Excise duties
Customs duties
Other tax revenues
Contributions
Non-tax revenues
Capital revenues
PUBLIC EXPENDITURE
Current expenditure
Payroll expenditure
Acquisition of goods and services
Repayment of interests
Subsidies
Social aid and transfers
of which pensions
Other current expenditure
Capital expenditure
of which for the National Investment Plan
Consolidated deficit/surplus
2006
I - IX
614,952
607,959
536,475
84,322
14,318
161,149
60,806
32,202
21,654
162,025
71,484
6,993
557,779
526,457
138,936
mln RSD
2007
I - IX
711,220
702,857
622,793
82,159
21,881
192,311
70,223
40,513
24,111
191,596
80,064
8,363
660,639
607,358
166,449
Index
I - IX 2007
I - IX 2006
115.7
115.6
116.1
97.4
152.8
119.3
115.5
125.8
111.3
118.3
112.0
119.6
118.4
115.4
119.8
76,653
19,499
36,389
242,777
166,949
12,204
31,322
58
57,172
93,773
13,055
37,445
284,631
190,172
12,006
53,281
22,058
50,581
122.3
67.0
102.9
117.2
113.9
98.4
170.1
38,362.3
88.5
www.mfin.sr.gov.yu
4
Republic of Serbia budget for 2007
•
The results achieved in the first nine months were somewhat better than
planned;
•
Revenues were at the planned level, while expenditure was a little below
the projected sum;
•
RSD 39 bln surplus was created in the Serbian budget in the first ten
months;
•
If the license fee is excluded from the revenues, and repayment of debt to
pensioners and net loans are included in the expenditure, the surplus
amounted to 0.5 bln RSD;
•
Arrears toward budget users were reduced by around 2 bln RSD;
•
Therefore, Republic of Serbia budget in the first ten months did not create
additional liquidity, and consequently did not influence widening foreign
deficit and growing inflation through demand.
www.mfin.sr.gov.yu
5
Execution of the Republic of Serbia budget in the first 10
months of 2007
TOTAL REVENUES
Tax revenues
Personal income tax
Corporate profit tax
Value added tax
Excise duties
Customs duties
Other tax revenues
Non-tax revenues
TOTAL EXPENDITURE
Curent expenditure
Payroll expenditure
Acquistion of goods and services
Repayment of interests
Subsidies
Transfers to other levels of government
Social aid from the budget
Other current expenditure
Capital expenditure
of which for the National Investment Plan
Budget deficit/surplus
2006
I-X
409,986
355,690
50,718
14,296
184,803
66,083
36,320
3,469
54,296
373,650
359,263
91,171
21,885
17,008
24,325
mln RSD
2007
I-X
477,468
419,585
49,953
22,473
220,313
76,402
46,349
4,096
57,883
438,316
402,393
120,283
27,218
13,838
25,759
Index
I - X 2007
I - X 2006
116.5
118.0
98.5
157.2
119.2
115.6
127.6
118.1
106.6
117.3
112.0
131.9
124.4
81.4
105.9
158,961
41,137
4,775
14,387
58
36,336
159,594
49,562
6,138
35,923
26,710
39,152
100.4
120.5
128.6
249.7
46451.5
107.7
www.mfin.sr.gov.yu
6
Republic of Serbia public debt
Share of Serbia's public debt in GDP
• In the first 9 months of 2007,
Serbia’s public debt was
reduced by some 300 mln
EUR;
60
50.2
50
• Share of public debt in GDP
was reduced to below 30%.
У % БДП
40
34.9
29.6
30
20
10
0
2005
www.mfin.sr.gov.yu
2006
IX 2007
7
Macroeconomic policy objectives for 2008
• Macroeconomic stability
– Reducing inflation and foreign deficit;
• Dynamic economic growth;
• Raising employment and standard of living;
• Accelerating EU stabilization and association processes;
• Accelerating economic reforms;
• A more balanced regional development.
www.mfin.sr.gov.yu
8
Macroeconomic framework for 2008
Execution
2006
GDP, bln RSD (current prices)
PROJECTION
2007
2008
2,125.80
2,454.30
2,779.00
3,354
4,058
4,573
5.7
7.0
6.0
Personal consumption
5.4
9.5
4.9
Government spending
8.3
16.1
5.7
Investments
15.2
28.6
20.2
Export of goods and services
28.2
32.6
25.8
Import of goods and services
22.2
36.5
20.5
-19.9
-20.2
-18.9
-12.3
-14.7
-14.1
6.6
6.5
6.0
58.9
55.5
56.8
2,026
2,000
2,014
GDP per capita, in EUR
GDP (%), annual change
Real growth of some GDP components, in %
Foreign trade balance, %of GDP
Current account of the balance of payments, % of
GDP
Inflation, end of period, in %
Foreign debt, % of GDP (in EUR)
Number of employees, annual average
www.mfin.sr.gov.yu
9
Main parameters of fiscal policy in 2008
• Share of public expenditure in GDP is planned to be reduced by 0.8
percentage points, while share of Republic budget expenditure will
be lowered by 0.7 percentage points;
• Consolidated fiscal deficit will amount to 0.6% of GDP, and Republic
budget deficit to 0.5% of GDP;
• Share of public debt relative to BDP will be reduced by 3.4
percentage points;
• Maintaining salaries at the same level in real terms in 2008 is the
key measure to reduce public expenditure in GDP in medium-term
period;
• Tax system reform will be continued, with the objective of simplifying
the system and creating a favorable climate for savings and
investments.
www.mfin.sr.gov.yu
10
Proposed 2008 budget for the Republic of Serbia
• Planned revenues and expenditure are 9.9% higher than in 2007;
• Despite the relatively modest increase in expenditure, it includes:
• additional 30 bln RSD for transfers;
• servicing budget debts in the amount of 3 bln RSD (war invalids, diaspora,
railways, judiciary etc.);
• additional projects amounting to 14 bln RSD (embassies, Eurovision,
University Olympics, army, police, science, judiciary and national pensions);
• Implementation of projects from the National Investment Plan in the amount
of 46 bln RSD (budget funds and loans).
• Planned budget deficit will remain at the 2007 level, though
revenues in 2007 included also the license fee for mobile telephony
(1% of GDP).
www.mfin.sr.gov.yu
11
Proposed Republic of Serbia budget for 2008
mln RSD
TOTAL REVENUES
Tax revenues
Personal income tax
Corporate profit tax
Value Added Tax
Excise duties
Customs duties
Other tax revenues
Non-tax revenues
TOTAL EXPENDITURE
Current expenditure
Payroll expenditure
Acquisition of goods and services
Repayment of interests
Subisidies
Donations and transfers
Social aid from the budget
Other current expenditure
Capital expenditure
of which for the NIP
Budget deficit/surplus
Index
Structure of
the
proposed
2008
Proposed
budget, in
%
Budget 2007 2008 budget
2008/2007
581,842
639,600
100.0
109.9
517,298
596,179
93.2
115.2
61,409
72,000
11.3
117.2
27,297
34,024
5.3
124.6
270,359
311,493
48.7
115.2
98,849
111,275
17.4
112.6
54,264
61,585
9.6
113.5
5,119
5,802
0.9
113.3
64,543
43,421
6.8
67.3
595,518
654,429
100.0
109.9
524,835
588,551
89.9
112.1
152,911
176,712
27.0
115.6
42,925
45,827
7.0
106.8
17,411
16,957
2.6
97.4
35,509
39,572
6.0
111.4
203,184
233,200
35.6
114.8
61,632
66,703
10.2
108.2
11,262
9,581
1.5
85.1
70,683
65,878
10.1
93.2
44,391
34,550
5.3
77.8
-13,676
-14,829
108.4
www.mfin.sr.gov.yu
12
REPUBLIC OF SERBIA’S REPAYMENT OF DEBT AND
ACQUISITON OF FINANCIAL ASSETS
in mln dinars
74,477
Total
1. Repayment of debt
48,358
1.1 Repayment of debt to national creditors
39,160
1.2 Repayment of debt to foreign creditors
6,361
1.3 Repayment of debt in line with activated guarantees
Acquisition of financial assets
www.mfin.sr.gov.yu
2,837
26,120
13
Closing considerations
• Planned fiscal policy for 2008 is a step in the direction of: reducing
the share of public expenditure in GDP, reducing state liquidity effect
on aggregate demand, improving the structure of public expenditure;
• User’s expectations concerning further growth of certain categories
of public spending in 2006 and 2007 (salaries, subsidies, etc.) were
interrupted;
• The proposed budget is not economically optimal, but is the
maximum in the given political and social circumstances;
• It is necessary to continue fiscal adjustments in order to reduce the
share of public spending in BDP, with the objective of creating a
fiscal surplus in the coming years.
www.mfin.sr.gov.yu
14
• Creating a fiscal surplus in the coming years is vital for reducing foreign
deficit;
• Creating a fiscal surplus requires implementation of a medium-term
policy of rationalization of public expenditure, whose key elements
should include :
– Slower growth of average salaries relative to the growth of nominal
GDP,
– Reducing number of employees in the government sector,
– Reducing subsidies,
– Rationalizing the network of state-owned institutions;
• It is also necessary to review effectiveness of state loans;
• It is necessary to reduce public expenditure and deficit relative to GDP,
in order to reduce macroeconomic disequilibria, regardless of the fact
that the state holds high privatization deposits;
• There is no space for reducing major tax rates in the next 2-3 years.
www.mfin.sr.gov.yu
15