site.btaIMF Experts Conclude Bulgaria Mission November 4-9

IMF Experts Conclude Bulgaria Mission November 4-9

Sofia, November 10 (BTA) - An International Monetary Fund (IMF)
mission visited Sofia November 4-9, 2015, for talks and meetings
 with the Finance Ministry and the Bulgarian National Bank
(BNB), the Bulgarian Finance Ministry said. The mission was led
by Michele Shannon, IMF Mission Chief for Bulgaria.

In its report of the mission, the IMF said that the visit aimed
to discuss the economic outlook and related policies with the
Bulgarian authorities.

A statement by Michele Shannon after the conclusion of the visit
 says that the mission  projects moderate growth for 2015 in
line with last year's level of 1.7 percent, supported by exports
 and absorption of EU funds. Strengthening domestic demand is
likely to lift growth modestly in 2016. Unemployment is
projected to remain high despite the fall caused by increasing
economic activity. Deflation is set to bottom out as commodity
prices stabilize.

The mission noted that preparations are underway for an asset
quality review (AQR).  The authorities emphasized their
commitment to a robust methodology and on-site review process,
an effective communication strategy, and prompt follow-up, the
statement goes. "Necessary steps by the government to provide a
backstop for potential capital shortfalls in individual credit
institutions, where this shortfall cannot be covered from the
market, are also on track."

Regarding the fiscal position, the IMF experts welcome
substantially stronger-than-projected 2015 revenues which they
are are driven by stepped-up administrative efforts. They note
that the domestic revenue upside is expected to be fully
absorbed to fund additional expenditures, including by some line
 ministries and municipalities. "This represents a missed
opportunity to accelerate needed consolidation. Given the
concentration of expenditures in the fourth quarter, the
government should exercise any remaining scope to contain
current spending through the end of the year," the statement
says.

The IMF experts find the 2016 deficit target and medium-term
fiscal path (2016-18) as "achievable". They say that strict
control over spending, including the wage bill, is needed, as
well as readiness to step up savings if revenues fall short.

The statement further underscores that the government's plans to
 consider reforms to the disability pension will be important.
"Sustained progress to address health system inefficiencies
following recent legislation and clarification of plans to
mitigate contingent fiscal risks related to state-owned
companies in the transport and energy sectors will also be
critical."

The IMF experts believe that Bulgaria's objective of convergence
 to average EU income levels depends on stepped-up progress in
addressing structural bottlenecks to growth. Improvement in the
financial position and market functioning of the energy sector
is needed. Effective investment in infrastructure and human
capital, as well as measures to strengthen the business
environment - including by reducing corruption and cronyism and
strengthening rule of law - are also central to catalyze the
investment and productivity gains needed for Bulgaria to meet
its economic potential, the statement says.