Cause and Effect in European Politics and Law

0.5% will be the budget deficit of Bulgaria this year

Adelina Marini, June 23, 2009

Significant underperformance in planned EU funds absorption as well as bad discipline with regard to the government expenditures, are part of the reasons the general government surplus in
Bulgaria for 2008 to had been 1.5% of the GDP instead of the 3% planned in the budget, says the annual report of the European Commission "Public Finances in the EMU 2009". Additional social and infrastructure maintenance spending of around 1.8% of GDP was adopted through a supplementary budget in mid-2008 had also contributed to the decrease of the surplus and the revenues in general. In addition, pensions were increased by more than the statutory rate and budgetary sector wage increases were higher than initially planned. In line with the budgetary surplus, the general government gross debt decreased to 14.1% of GDP. Instead, the Commission experts forecast that the government debt will rise this year to 16% and in 2010 - to 17% in spite of the forecast of the Bulgarian government for 17% government debt this year and 15% - the next.

Given higher risks to the public finances in the current economic juncture, maintaining a budget surplus would require further expenditure cuts beyond the 90% rule, which might prove difficult in a rapidly deteriorating economic environment. The so-called '90%' budget execution rule, which was abandoned in 2008, has been re-introduced in the 2009 budget. Under this rule, only 90% of the noninterest budget allocations (excluding social transfers) can be disbursed to the spending units in the course of the year.

Due to the lack of fiscal room for manoeuvre, as a result of large external and domestic macroeconomic imbalances, the 2009 budget does not foresee any fiscal stimulus measures in response to the economic downturn, the report says about Bulgaria.