Cause and Effect in European Politics and Law

Bulgaria will either absorb EU funds or not

Adelina Marini, September 1, 2009

The Ministry of Finance of Bulgaria has developed 2 scenarios in its mid-term fiscal framework for the period 2010-2013, for the effects of the EU funds on the economy and the budget of the country. The first scenario is developed on the assumption that "no money from EU will enter the Bulgarian economy for the period 2010-2015, while the alternative scenario is based on the assumption of full and effective the EU money. The difference between the forecasts in the 2 scenarios is actually the influence of the EU funds over the economy".

If the second scenario is developed, the absorption of EU funds will lead to positive effects on supply and demand. According to the estimation of the Agency for economic analyses and forecasts, the direct effect from Bulgaria's EU membership and the absorption of EU funds over the budget will create a need for national co-financing as well as in the payment of the annual installment to the budget of the EU. For the period 2010-2013 this installment varies between 1.3% and 1.2% of the GDP while the amount of money, needed for the national co-financing will vary between 0.6% and 1.3% of GDP for the period 2010-2015. The difference in the periods is due to the fact that some contracts will be implemented after the end of the financial perspectives for 2007-2013.

The indirect effect of the EU funds consists of higher revenues from taxes in the budget because of the stimulation of the economic activity which will lead to a change in the structure of the economic growth.

In numbers, both scenarios who that if no absorption of EU funds occurs the economic growth in 2010 will be -5.4% while the second scenario indicates -2.0%. For 2011 the proportion is the same - 1.0% and 3.8%, respectively. The proportion is gradually being balanced by 2015. There is almost no difference between the two scenarios with regard to the inflation but, regarding the gross investments, for 2010 1.9% growth is expected if Bulgaria does not absorb any EU funds. With the alternative scenario the growth of the gross investments is expected to reach 7.5%. It is the difference in the data that forms the influence the EU funds will have or not have over the economy of Bulgaria, as indicated by the Agency for economic analyses and forecasts.