The state budget closed the 8-month period of the year with an annual 12% drop in revenues, marking the strongest contraction in tax collection in the last decade, Klan TV reported on Wednesday, citing the data of fiscal indicators of the Ministry of Finance and Economy. Compared to a year ago, the coronavirus (Covid-19) pandemic has given a blow worth Euro 300 million to budget revenues, while performance in recent months, after the economic recovery has been in compliance with the revised budget plan.

The strongest contraction was in tax revenues due to the postponement of the payment of profit tax for business and value added tax (VAT).

VAT shrank by almost Euro 90 million in the January-August period, while the collection of other taxes had a lower performance than a year ago.

The most optimistic data come from the labor market, where taxes on the payment of social contributions fell by 1.4% compared to a year ago, while exceeding the plan for 2020 at 102.5%.

State budget expenditures have focused on financing business support packages, individuals affected by the pandemic and public investment expenditures on reconstruction and health.

The deficit marked the level of Euro 438 million at the end of August, marking an increase of Euro 42 million compared to the previous month, but within the limit of Euro 540 million set in the normative act of budget change.

In July, Albania’s government decided to revise down its 2020 gross domestic product (GDP) forecast to a 4.3% contraction from a 4.1% growth originally projected in the budget law due to the adverse impact of the coronavirus disease on the economy.

Budget deficit in 2020 is now projected at Lek 133 billion equivalent to 8.4% of GDP, up from Lek 29.3 billion, or 1.6% of GDP forecast in the budget adopted by the parliament in December 2019.

According to the World Bank, Albania's GDP is expected to shrink by 5% this year, downgrading its previous forecast for a 1.4% contraction of the economy made in April.

The country's GDP is projected to bounce back to an 8.8% growth in 2021, the World Bank said in its June 2020 Global Economic Prospects report.

Albania is one of the countries in the region hit hardest by the coronavirus crisis in terms of tourism, which accounts for a significant share of its GDP. The tourism industry was further affected by the recent earthquake that took a heavy toll on human life and physical infrastructure, the bank said.

Albania's economic growth slowed to 2.2% in 2019 from 4.1% in 2018 due to the earthquake that struck the country in November.