site.btaFinance Minister Says No Budget Plan Is Perfect, Hopes 2017's Will Not Stir Debates

Finance Minister Says No Budget Plan Is Perfect, Hopes 2017's Will Not Stir Debates

Sofia, October 28 (BTA) - Bulgaria's real GDP growth is expected to slow down a bit next year before picking up pace and reaching 2.7 per cent towards the end of 2019, Finance Minister Vladislav Goranov said at a sitting of the National Tri-partite Cooperation Council.

"Once again, as was the case in 2016, we believe domestic demand will be the main growth driver," Goranov said, adding he hopes the process of passing the budget bill will be uneventful and will not stir any debates as there are far more pressing issues to tackle.

The decline in the jobless rate is expected to slow down in 2017, the Minister said. The jobless rate is seen at 7.3 per cent next year and falling to 6.5 per cent by the end of 2019.

Inflation is projected at 1.5 per cent in 2017 but will speed up a bit in 2018-2019, assuming slightly higher prices on the international oil and energy markets, Goranov said.

The Finance Minister noted the Government continues to believe in gradually achieving a balanced budget. The budget deficit target for 2017 is set at 1.4 per cent of GDP, at 1.0 per cent for 2018 and at 0.5 per cent for 2019.

The leader of the Confederation of Independent Trade Unions in Bulgaria (CITUB), Plamen Dimitrov, and the Chairman of the Bulgarian Industrial Capital Association, Vassil Velev, hailed the new budget plan as an improvement on the Government's 2016 effort.

Dimitrov demanded more funds for wages in the public sector as well as tweaks to some of the parameters of the social insurance policy. CITUB is insisting that the maximum contributory income is set at 2,800 leva as such an increase will also bump up the maximum pension.

CITUB is also seeking an increase at the bottom end of the employment benefits where no changes have been made in seven years. Dimitrov said the minimum wage should continue to increase in 2018 and 2019 and noted there has been a slim 5 per cent pay rise in some government agencies and a slightly higher increase in the education system. Away from those sectors, however, payroll costs have gone up by 10-20 million leva, nowhere near the expected 10 per cent pay rise.

CITUB also dismissed as underfunded in the new budget even sectors to which the Government attaches priority importance.

The President of the Podkrepa trade union, Dimitar Manolov, demanded more funds - at least 55 million leva, for culture and science. He also urged allocating 22 million leva more for the National Railway Infrastructure Company, 26 million leva to increase salaries at the Bulgarian Academy of Sciences, and 8 million leva more for the Agricultural Academy. He described the 2017 budget as driven by inertia.

Velev said the business community considers as feasible the Government's 2017 targets in terms of economic growth and jobless levels. The projected income growth is achievable - could be more ambitious, but "we are sticking to a more cautious outlook," he said. The employers are happy with the Government's taxation policy and the freeze of the minimum and the maximum contributory income levels.

In his view, more education funding and not administrative measures like raising the minimum wage would push the economy forward. Velev dismissed the budget deficit as an outcome from half-baked reforms.

Bulgaria Industrial Chamber (BIC) Executive Chairman Bozhidar Danev said the budget plan for 2017 indicates a development lag and lacks clarity in terms of spending policy, targets and efficiency. The projected growth rates would see Bulgaria lag behind the average pace in Central and Eastern Europe, Danev said.

Bulgaria continues to be the firm bottom-placer among EU member states in terms of GDP per capita, income levels, investments, education, and quality of health care, Danev said.

In his view, the current GDP growth is not driven by reforms but by external factors, including rising exports and inflation that is fueling domestic consumption.

BIC's calculations indicate that given the size of the Bulgarian economy, it should be growing by 4.23 per cent in order to bring the country closer to its Central and East European peers in terms of both GDP per capita and purchasing power parity. Romania, for instance, is targeting a growth of 6 per cent in 2016, the Czech Republic - 4.5 per cent, and Poland - 4 per cent, and they have considerably bigger economies, Danev said.

The priorities of the 2917 budget are neatly stated but no specific goals have been set to benchmark the efficiency of budget spending, Danev said, adding that special attention should be paid to the Defence and Security sector where spending is projected to increase by over 800 million leva, topping outlays on education and health care.

The 26-year-old policy of centralising the financial resources continues to be the order of the day, Danev said, noting there has been a move towards more regulations and higher fees. In 2015-2016, revenues from fees rose 11 per cent and are projected to rise by 7.6 per cent in 2017.

There is no population policy in terms of priority or numbers in the 2017 budget plan or in the three-year budget framework. Employment levels are projected to increase by only 0.6 per cent in 2017 and the number of workers with social insurance by only 0.06 per cent, Danev said.