In 2015 Bulgaria’s cabinet failed to reduce the budget deficit to the targeted level of 3% of the country’s gross domestic product, despite the higher economic growth and the higher revenues collected in the state treasury, which was a very bad surprise, economic expert Desislava Nikolova from the Institute for Market Economics told Radio Bulgaria. In other words, the higher revenues collected by the state this year were spent easily and the ministries which failed and refused to reduce their staff expenditures benefitted the most, Desislava Nikolova said and added:

“We are very concerned that the authorities are planning to reduce sharply the deficit in next year’s state budget. According to the amended budget for 2015, the deficit this year should reach 3.3% of the country’s GDP. However, in 2016 the deficit is targeted at 2% of the GDP. In other words, we are talking about a budget consolidation to the tune of 1.3% of the gross domestic product, which is twice higher, as compared to the planned consolidation in 2015. This year Bulgaria had to reduce the budget deficit by 0.7% of the GDP only, but the cabinet failed to meet that target. That is why, in 2016 that policy line may also turn unsuccessful, because a series of problematic spheres are unwilling to curb their expenditures. The revenue side of the 2016 budget also raises many concerns, because the Ministry of Finance has estimated that EUR 300 million will come from concession fees of Sofia Airport. This is not in line with the standard concession contracts, where the revenues are much smaller and the fees are collected within a long period of time. However, the Bulgarian cabinet aims at collecting the whole sum in one single payment, which questions the fulfillment of that deal. If the deal fails, the budget deficit would automatically rise by 0.7% to 2.7% of the GDP”

In Desislava Nikolova’s view, next year’s forecasted economic growth of 2.1% faces a series of risks such as the insecure international economic environment and the slowdown of the Chinese economy which poses a threat over the world economy as a whole. In 2015 Bulgaria’s economy marked a higher than expected growth due to the better than expected absorption of EU funds. However, in the beginning of the new programming period, the absorption rate of these funds will be lower, which would influence negatively the country’s economic growth.

“Investments in Bulgaria after the world economic and financial crisis were highly dependent on capital expenditures financed with European money. On the other hand in 2016 consumption in Bulgaria may not be as high, as forecasted. The Bulgarian Ministry of Finance relies on local consumption to boost economic growth. However, the authorities made a very negative step and set the minimum monthly salary at EUR 210 in 2016 and EUR 230 in 2017. This policy may affect the labor market, which started to recover slightly in 2014. In many Bulgarian regions the gap between minimum and average wages is very insignificant and the local employers are forced either to make redundancies, or refrain from opening new job positions.”

A recent economic analysis of the Institute for Market Economics shows that 125,000 Bulgarians with lower education and low qualification lose their jobs, when the minimum salary increases by EUR 50. On the other hand, the authorities are planning a record-high increase of the minimum social security thresholds. The average increase in all sectors of the national economy will amount to 7.5% which, according to Desislava Nikolova, may force a series of small and medium enterprises to cut jobs and enter the shadow economy.

English: Kostadin Atanasov