Western economic experts are warning that the recession in Europe and the crisis in Greece hide risks for Bulgarian economy. “These will be the basic challenges Bulgaria will have to face in the short-term perspective”, a report of the British specialized journal The Economist. The government in Bulgaria will freeze a number of important economic reforms which would lead to a slower recovery despite the fact that Bulgarian public finances are considered one of the most stable in Eastern Europe, and it is quite unlikely that the country could be hit by a crisis similar to that in Greece, Reuters News Agency reports.
Bulgarian economic analysts and right-wing politicians issue warnings that if the government does not take quick and radical anti-crisis measures, the Bulgarian economy will be swept by a new wave of the crisis. It is possible that the country might sink into a financial crisis and follow Greece’s example. One of the necessary steps to prevent this is to stop the pressure on the budget costs due to the demands of sector organizations. Economic experts focus on the growing budget deficit from the first two months of the year and the sharp drop in the country’s revenues. Experts’ calculations indicate that the drop in incomes due to indirect taxes for January only is estimated at some 500 mln leva, and almost 40% of the business sector has gone into the grey economy.
The position of the government:
Bulgaria’s Finance Minister Simeon Dyankov commented the warnings of experts, saying: “Bulgaria will not be faced with such difficult economic and social problems as those in Greece”. He also added that Bulgarian economy will emerge out of the crisis in the second half of this year. Until then, however, each additional expenditure must be compensated with a new source of income, otherwise the budget deficit will grow and we will have the Greek situation here.
According to economic data, Bulgaria is second in industrial growth in the EU and is first in terms of its fiscal policy, but comes last in labor productivity, as is revealed by a report of Business Europe that is to be presented in Brussels in March 15. According to experts, Bulgaria shows considerable stability in the crisis and is at the same level with France and Hungary. In the section for taxes, the Business Europe reports ranks Bulgaria 10th out of 29 EU member states.
In an interview for Radio Bulgaria, economy analyst Georgi Angelov from the Open Society Institute in Sofia, gave his commentary on the topic.
What are the measures, necessary to be taken, so that Bulgaria doesn’t follow the Greek scenario?
“We shouldn’t weaken our budget discipline and start spending constantly with no money in the budget. The reforms shouldn’t be postponed endlessly for the future, we have to work so that the positive results of these reforms affect the business climate, the institutions, the investment climate and the recovering from the crisis to be supported.”
What are the reasons for the decreased incomes of the state?
“There are several reasons for that. Take the social securities for an example – when the unemployment levels are higher, less people work and therefore less people pay. As far as the profit tax is concerned, the huge decreasing there is due to the fact that the profits of the companies have shrunk. Then comes the third reason – the recession affects the import and consumption and hence the negative effect on tax incomes. The grey sector also matters, since it stimulates the income covering. These stimuli will continue to increase more if the government increases the healthcare contributions, thus making life harder for the average taxpayers. I would like to see a program for gradual decreasing of the tax and insurance burden, since it will help new jobs to be opened and will decrease the stimuli for concealing incomes.”
Where are the hidden risks of the situation?
“There has been a positive tendency within the past weeks and months in the industrial branch, as well as in the export area. This recovering however can be easily stopped if the government stars to increase the expenses and the tax and insurance burden at the cost of the business and the labor market. Then instead of taking advantage of the improving situation within the entire EU, we can stop our recovering and remain one of the few countries, along with Greece that continue to go down.”
Written by: Tanya Harizanova
English version: Zhivko Stanchev
