site.btaEmployer Association: Bulgarian Economy to Grow by Up to 2.8 Per Cent in 2017

Employer Association: Bulgarian Economy to Grow by Up to 2.8 Per Cent in 2017

Sofia, October 17 (BTA) - The Bulgarian economy could achieve next year a growth rate of 2.6 to 2.8 per cent, or even higher, if the Government makes consistent efforts to plan and effectively execute adequate measures to improve the business environment, encourage exports and boost domestic consumption, the Bulgarian Industrial Capital Association (BICA) said Monday.

In the past eight years, the Government has been consistently running a budget deficit which sometimes exceeded 3 per cent of GDP, a fiscal policy that resulted in a substantial increase in the state debt needed to offset budget imbalances, BICA said in a report adopted by its managing board.

It is high time Bulgaria got a fiscal plan where public spending matches budget revenues, the report said, noting that balancing the budget in 2017 is achievable given there is room to improve the rate of collection of budget revenues while finding more effective and efficient ways to spend public funds.

The Finance Ministry has reported a budget surplus of 3.34 billion leva on a consolidated basis by September but the key issue is the shape of the state budget where, based on available data that is incomplete, there is a surplus of around 900 million leva, BICA said.

During the last visit of IMF officials, the fund projected a budget deficit of around 1 per cent by the end of the year or around 900 million leva, whereas the official target of the Finance Ministry is around 1.1 billion leva. This means 1.8-2.0 billion leva of deficit will be incurred in the last quarter of the year which is a surprisingly high number. Even more so, given that, unlike in late 2015, no major payments under completed EU-backed projects are expected for the remainder of 2016, BICA said.

Given these short timeframes, there is ground for concern over inefficient spending of public funds - even if it targets investment projects that were probably drawn up earlier but are yet to be discussed with the business community or the wider public, and there is also the feeling the upcoming elections could be responsible for some pork barrel spending, BICA said.

The report projects the country's average jobless rate will drop by 1.0 percentage point to 8.1 per cent in 2017.

BICA noted that the rate of increase in the average monthly pay of workers hired under labor contracts is several-fold the growth rate of the country's inflation and GDP. In 2015, the average monthly pay rose 7.9 per cent with an increase of 7.3 per cent registered in the first half of this year.

BICA said it does not support raising budget spending on defence and on internal security - neither as absolute figures nor as a share of GDP, but will back allocating more budget funds for education.