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The draft state budget for 2025 is based on the forecast of revenue growth of only 5.7% while the huge army of pensioners will receive 23% of all expenses and 25.5% of all income despite the fact that the government has not planned to increase pensions .
The draft budget for next year presents the state of the Albanian economy, an economy that, according to the official estimates of the Ministry of Finance, is expected to have an anemic growth of only 5% in nominal terms, growth that is not expected to improve even in 2026 or in 2027 and which clearly does not allow for pension increases despite the Prime Minister's sensational promises in this area. The draft budget nevertheless foresees an abnormal increase in salary expenses, by 17.8%, which obviously reflects the pre-election policy of the government and which is expected to be followed, according to the forecasts of the Ministry of Finance, with zero growth in the years 2026 and 2027, i.e. after the elections.
The government's total revenue is expected to reach 755 billion lek next year, about 7.55 billion euros according to today's exchange rate. These revenues are generated from taxes and fees and social and health insurance contributions paid by citizens. Against the level of income expected to be realized in 2024, the increase will be 5.7%. With this increase, the government will have to fill many pockets, on the one hand the punctured pockets of concessions that swallow money for unfinished roads or for incinerators that do not light up and on the other hand, to pay the interest on the public debt, which have increased significantly in recent years. The additional income also needs to be used for the expected increase in pension expenditure, not for pension increases, but for the increase in expenditure caused by the increase in the number of pensioners. Thus, budget revenues in the coming year are expected to be 400 million euros more than this year, but budget expenditures for pensions are expected to be 143 million euros higher, while interest expenses are expected to be about 40 million euros more. The government has also set aside 57 million euros as a reserve to pay the debt in case the interests increase more than that.
The overall budget expenditures are expected to be 823 billion ALL or approximately 8.23 billion euros at today's exchange rate. Of these, public investments are expected to be 1.6 billion euros, while the rest are current expenses, i.e. expenses such as salaries, pensions or debt interest.
Poor growth
The first and last problem of the state budget and the Albanian economy in general is the modest economic growth predicted, not only by international institutions such as the IMF and the World Bank, but also by the Ministry of Finance itself. The World Bank predicts real economic growth of 3.5% for the years 2025 and 2026 and the Ministry of Finance predicts nominal economic growth of 5.1% until 2027. While the government roars every day about its success in the tourism sector, and even claims that will also include retirees in economic growth, the fact is that this sector is very small. It occupies only 3.7% of the Albanian economy and therefore, even if it increases by 30 or 50%, it is not able to improve the lives of the vast majority of Albanians.
The International Monetary Fund estimates that Albania's economic growth potential in real terms is 4.5% per year. The difference from 3 to 4.5, in current conditions, translates into a monetary amount of 410 million euros. In short, optimal economic growth leaves about 410 million euros more in the hands of citizens every year compared to current growth. The reasons why growth is anemic or below potential are obviously related to what is known in theory as the "misallocation of resources", that is, the use of the state budget in work that does not have a high return on investment potential.
The woes of the national economy are likely to worsen in the coming years. The number of Albanians on the verge of retirement is much higher than the number of Albanians who are expected to enter the labor market, which means that the cost of pensions will increase faster than the number of employees paying social insurance . Faced with this situation, only structural reforms that bring higher economic growth can help to pay, not pension increases, but at least those minimum pensions./ BIRN
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