Transcript Macroeconomic Outlook Trends and Challenges

Macroeconomic Outlook
Trends and Challenges
Igor Luksic
Minister of Finance
Fiscal Reform
GFS
Introduction of the Treasury
Tax System in accordance with EU
Legislative
Programme Budgeting
Internal Audit
New Payment System – Revenue
Model
Basic Economic Facts
GDP 2004 real growth
Budgetary deficit
Inflation rate
External public debt
Total public debt
Current account deficit
Unemployment rate
Legal tender
3,7%
2,1%
4,3%
32,7%
44,8%
9,2%
22,6%
Euro
The Growth of the GDP
GDP
2002
2003
2004
2005
1,800
–
–
–
–
1
1
1
1
301
433
535
644
mln
mln
mln
mln
€
€
€
€
1,600
1,400
1,200
1,000
In 2004 instead of projected
2.7% the real growth reached
3.7%
800
600
400
200
The goal for 2005 is 4.1%
0
2002
2003
2004
2005p
The Decrease of the Budgetary Deficit
Budgetary deficit has been
falling in line with the IMF
program
It is expected to fall to
1.6% excluding FFPL
Including FFPLs 2.9% of
the GDP
Deficit/suficit 2002-2005 p
0.00
-0.50
-1.00
2003
-1.50
-1.60
-2.00
-2.10
-2.50
-3.00
-3.50
-3.29
2004
2005p
The RPI Inflation
Having euro as a strong
and stable currency drove
the inflation to single digits
In 2004 instead of
projected 4.5% inflation
was 4.3%
The goal for 2005 is 3.5%
140
120
100
80
60
40
20
0
1999
2002
2003
2004
Public Debt of Montenegro
Total public debt fell from 85.9% in 2002 to 44.8% in 2004
thanks to the rescheduled debt to the World Bank, 51%
Paris Club write-off and no committments to the London
Club of creditors
The external debt is 32.7%
Domestic debt consists of the banking loans, old savings
and T-bills
In 2004 Montenegro received for the first time in its
history the S&P credit rating BB for the long term bonds
Huge privatisation receipts will be used to repay internal
debt in order to imrove credit rating and to invest in
infrastructure
Reduction in the amount of the T-bills and loans will lead to
the increase of the money supply and consequently to the
drop of the interest rates
New Loans
Montenegro does not draw any SDR from the IMF
World bank – mainly structural reforms loans
EIB,EBRD, KfW – mainly infrastructure oriented
loans (reconstruction of the roads, airports,
municipal infrastructure)
Privatisation and FDI
After slow down in
2003 the FDIs
increase
Goal for 2005
achieved in the I
quarter following
succesful privatisation
of Telecom
KAP, Podgoricka Bank,
Shipyard, part of the
energy sector, hotels
and so on to be
privatised this year
160
140
120
100
80
60
40
20
0
2002
2003
2004
2005
Legal Framework and Business Barriers
Business start-up fee:
– Entrepreneur (sole proprietorship) – 1 EUR
– Limited Liability Company – 1 EUR
– Shareholder’s Company – 25 000 EUR
– Bank – 5 000 000 EUR (license from Central bank of
Montenegro)
National treatment of foreign investors
Free movemnt of capital will be introduced with the new Law on
Capital transactions
Free profit repatriation
Government tries to identify and eliminate various business
barriers
Fiscal framework
VAT introduced in 2003 – 17% (basic food, books etc
exempted)
In 2004 PIT (now 15, 19 ad 22%) and social contributions
cut by 10%
In 2004 Corporate Income Tax cut to 9%
Challenges are further simplification of the tax system,
continual reduction of the government expenditures and tax
burden and compliance with eurozone Mastrichts criterion
THANK YOU