site.btaIMF: Well-Performing Economy in Bulgaria, Growth to Reach 3.8%

Washington, February 22 (BTA) - The IMF finds the Bulgarian economy to be performing well with growth estimated to reach 3.8 percent in 2017 and 2018, driven by strong exports, easier financial conditions, and growing confidence. It says so in a report follows the conclusion on February 14 by the IMF Executive Board of Article IV consultation with Bulgaria.

Bulgaria's current account remained in surplus in 2017 despite rapid wage growth, the IMF says. The economy shows signs of a closing output gap. Inflation turned positive in 2017 and inflationary pressure is rising. The unemployment rate has declined to 5.8 percent, the lowest level since the global financial crisis.

Fiscal outcomes have been stronger than budgeted in recent years - a surplus of 0.8 percent of GDP is estimated for 2017 - reflecting mainly revenue overperformance and under-execution of capital spending.

The IMF believes that the main challenge is to translate this recent recovery into sustained and inclusive growth and convergence with other EU countries.

It points out that Bulgaria's per capita income is only half of the EU average and income inequality is higher than EU average.

Growth is projected to moderate to 2 percent over the medium term, reflecting capacity constraints and unfavorable demographics.

Public debt is low, but contingent liabilities and long-term fiscal pressures from demographic challenges could pose fiscal risks over the long run.

The IMF says that advancing governance reform and improving the efficiency of public institutions at all levels remain key to raise potential growth and contain fiscal risks. Reform priorities include improving public infrastructure, enhancing quality of education and healthcare, addressing mismatches between education and the labor market, and strengthening the management and oversight of state-owned enterprises.

The report concludes that the banking system is resilient, but non-performing loans remain well above the EU average and two of the banks identified by the asset quality review and stress test still require larger capital buffers.

IMF recalls that under Article IV of its Articles of Agreement, it holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.