The pension scheme deficit improves in 2023, reaching 0.8% of GDP

2024-02-21 15:20:00, Aktualitet CNA

The pension scheme deficit improves in 2023, reaching 0.8% of GDP

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The deficit of the public scheme improved significantly last year, as income from contributions grew at much higher rates than expenditure on pension payments.

The Minister of Finance, Ervin Mete, after the meeting of the Council of Ministers, after the approval of the Normative Act for the 2024 Budget, that "during the last year, the contributions collected in the social security scheme reached 5.7% of the GDP, significantly reducing the deficit of the scheme, at nearly 0.8% of GDP, the lowest level ever recorded".

Official data from the Ministry of Finance refer to social security income reaching 124.6 billion ALL by 2023, with an annual increase of 18%, on the other hand, pension scheme expenses increased in the same period by only 4%.

The increase in income more than the increase in expenses brought down the deficit of the pension scheme to a value of 45.6 billion ALL, 20% lower than in 2022.

The pension scheme's deficit has been helped by double-digit income growth. Earnings were boosted by increased employment, an increase in the minimum wage and wage growth at all levels last year. On the other hand, pressures on spending remain low as more and more retirees are not meeting the criteria for full retirement.

To receive a full old-age pension in 2023, 37.5 years of work with paid insurance were needed, but those who retired had an average of only 27 years of work with insurance.

People who retired in 2012 had paid an average of 34 years of insurance and in 2023, only 27.

Failure to meet the criterion of years of insured work significantly reduces pension benefits.

Many Albanians risk their pension, the necessary contribution years are significantly reduced

On the one hand, young retirees have fewer and fewer years of contributions and on the other hand, year after year, together with the retirement age, the period of years with contributions also increases. Last year it took 38 years of insurance to get a full pension and by 2030 it will take 40 years to get a full pension.

But with the current rates, Albanian pensioners will not complete even half of the years with contributions, making their payments in the future to be very low, almost like the minimum pension.

As the years-of-contribution criterion is now being met less and less, the new old-age pensions are becoming similar to social pensions, thus discouraging the payment of contributions by current employees, notes the International Monetary Fund in the latest revision of the Agreement with Albania.

IMF: Future pensioners poor, only 38% of the working-age population pays insurance

Pensioners, who do not fulfill their working years and do not manage to benefit from a full old-age pension, are increasing rapidly.

According to official data, in 2022, pensioners with partial payment make up 48% of the total number of people who benefit from old-age pension from 45% in 2021.

Flaws: The economy performed well

The Minister of Finance Ervin Mete said today after the change of the budget that the economy performed well last year and at the end of the 2023 budget year it turns out that the main macro-economic indicators had significant improvements, following a positive trend, which we expect to be such even during the year 2024.

The government reviews the 2024 budget, the revenue plan increases by 1.7%, the deficit decreases

"More specifically, public debt fell to 59.2% at the end of 2023, lower than the pre-pandemic period and also the lowest since 2010.

The primary balance at the end of 2023 returned to a positive position and the budget deficit marked the level of 1.4% of GDP.

The level of income reached 643 billion ALL, or over 6 billion euros, with an increase of 12.3% compared to 2022 and this good performance is continuing in the first months of 2024, according to the data so far.

Over the past year, contributions collected in the social insurance scheme reached 5.7% of GDP, significantly reducing the scheme's deficit to nearly 0.8% of GDP, the lowest level ever recorded.

Based on these developments, the revenues for 2024 are revised upwards, which are already projected at about 687 billion ALL, or 28.2% of GDP.

As for the expenditure part, in addition to the budgeting of the restructuring of the ministries, through this normative act we are also supporting a State Guarantee Instrument of 4 billion lek in support of businesses in the fashion processing industry sector, which need to improve technological processes and to further increase productivity, this also to cope with the effects of shocks in this sector.

This instrument aims to support businesses through the state loan guarantee, in order to secure the necessary financing from second level banks.

Also, the changes in this act foresee the reclassification of the financing category of the new commercial port, the financing of the special structure for the protection of the environment and the development of tourism, as well as the financial support for the reconstruction of some buildings and the improvement of the infrastructural conditions of professional education, in the framework of the Government's attention to this sector.

At the macro level, fiscal consolidation continues, projecting a downward trend of the public debt, as well as a deficit 4 billion ALL lower than the initial budget projection", said Mete./ Monitor magazine.