site.bta2016 Budget: Expectations for 2.1% Growth and Continued Fiscal Consolidation

2016 Budget: Expectations for 2.1% Growth and Continued Fiscal Consolidation

Sofia, October 26 (BTA) - The Finance Ministry published Monday
the draft of the 2016 national budget and an update of its
medium-term budget forecast for the 2016-2018 period which
constitutes the reasoning for the budget bill.
  
The key priority of the fiscal policy in the medium term remains
 preserving the stability of public finances.
  
The forecasts and expectations for the development of the
Bulgarian economy have been adjusted in a positive direction and
 reflect the better-than-expected performance in 2015 and the
favourable trends forecast until 2018, the Ministry says.
  
Real GDP growth is expected to reach 2.1 per cent in 2016 with
relatively stable growth levels in 2017 and 2018 (2.5 and 2.7
per cent, respectively).
 
The process of fiscal consolidation will continue. The revised
budget forecast for the 2016-2018 budget deficit is 2 per cent,
which is an improvement from the 2.5 per cent in the budget
forecast from the spring of 2015. The deficit forecast for 2017
and 2018 is 1.4 per cent and 1 per cent of GDP, respectively.
 
The taxation and insurance policy will aim to support economic
growth, improve the business climate, curtail tax fraud and
increase the fiscal stability in the long term.  No significant
changes of the key taxes are planned for 2016-2018 except for
some specific changes in respect of the excise duty called for
by the requirement for reaching the minimum excise levels in the
 EU in keeping with the agreed transition period. Such increase
of excise duty will impact positively the revenue side of the
budget.

The social insurance contributions will remain unchanged in 2016
 but in each of 2017 and 2018 the pension insurance
contributions will increase by one percentage point.

The minimum contributory income will be gradually and partially
increased for persons whose medical insurance is paid for by the
 state.
 
The revenue side of the budget is set to remain relatively
stable within the range of 37.4-37.1 per cent of GDP with a
slight downward trend.   

The expenditure side shows a decrease from 39.4 per cent of GDP
in 2016 to 38.2 per cent of GDP in 2018.

 
   
The minimum monthly wage is set to increase to 420 leva from
January 1, 2016 to 460 leva from January 1, 2017 and unchanged
in 2018. This aims to help achieve a nominal growth of the
income of the low-income groups on the labour market.

In secondary education, an increase of outlays will allow an
increase of the wages of educators and non-teaching staff in
schools. Outlays will also be increased in 2016 to allow higher
costs for staff in the social services sector so as to preserve
the administrative capacity and normal functioning of the
administrative structures under the Minister of Labour and
Social Policy.

The policy in health care will be aimed to ensure the efficient
functioning of the system, improving the legislation with
respect to health care, hospital services, the pharmaceutical
policy and electronic health care.

In 2016-2018, pensions will increase from July 1 of each year as
 follows: 2.5 per cent in 2016, 2.7 per cent in 2017 (and
increase of the weight of each year of contributory service to
1.13 from 1.1) and 2.8 per cent in 2018  (and increase of the
weight of each year of contributory service to 1.161 from 1.13).

Regional development and the transport infrastructure are among
the key priorities of the government in 2016-2018. Investment in
 infrastructure will be prioritized, with the financing sourced
both by the national resources and the EU-backed operational
programme and measures for economic, social and regional
cohesion.
 
The government debt-to-GDP ratio is expected at 28.9 per cent at
 the end of the period. The key reason for the increase of the
government debt is the need to ensure resources for refinancing
the current debt, financing the budget deficits and maintaining
the level of the fiscal deficit as an anti-cyclic mechanism for
dealing with liquidity imbalances.

The Finance Ministry has also revised its assessment of the 2015
 consolidated fiscal programme to reflect the increased
absorption of funding from the EU programmes and the significant
 over-achievement of revenues.

The most significant additional pressure on expenditures comes
from the higher-than-expected absorption of EU funding due to
the conclusion of the 2007-2013 programming period, among
others. The medium-term forecast also takes into consideration
the impossibility to dramatically cut back on the staff
expenditure in some sectors.

As a result of this, the budget deficit for 2015 is expected to
reach 3.3 per cent of GDP on a cash basis but it will remain
below 3 per cent on an accrual basis which meets the Maastricht
standards, the Finance Ministry says.