An International Monetary Fund mission visited Sofia during May 2–9 2012, to discuss economic developments and government policies with the Bulgarian authorities.
Ms Catriona Purfield, IMF Mission Chief for Bulgaria, made the following statement: "Prudent and decisive policies along with strong buffers ensured Bulgaria's resilience through the global crisis. Complementing the strong policies with higher fiscal buffers will safeguard this resilience going forward. Boosting potential growth by implementing bolder structural reforms is also a priority. Growth continues to slow, mostly reflecting external headwinds. Real GDP growth is projected to reach 0.8 per cent in 2012 and rise moderately to 1.5 per cent in 2013, contingent on euro area growth recovering and much stronger EU funds absorption by Bulgaria. Headline inflation is projected at around 2 per cent in 2012. Risks to the outlook, particularly emanating from an intensification of the euro area crisis, remain to the downside."
"Fiscal buffers need to be raised to safeguard resilience. At this juncture, it would be prudent to increase the fiscal reserve, and to avoid steps that would reduce it. Tapping international markets to secure funds to cover both future rollover needs and bolster the reserve would be a good option. A medium-term debt plan would promote a more integrated funding approach going forward."
"Fiscal policy is on track to meet the 2012 fiscal deficit target. Reforms to improve VAT compliance are yielding commendable results. Realising the targets for EU funds absorption will be critical to support growth now and in the future. With the budget deficit target for 2013 unchanged from 2012, there will be space if there were to be a downturn to permit the fiscal deficit to widen within the Financial Stability Pact limits, provided financing is secured. High unemployment requires greater efforts to expand active labour market programmes and social safety nets. These programmes could be financed through EU social funds or measures to bring the grey economy into the tax net."
"The recent pension reform will yield substantial savings worth 4 per cent of GDP over the medium term. Building on this momentum and to boost labour market participation, the authorities could also consider linking the retirement age to life expectancy and unifying retirement ages. Steps were also taken to reduce contingent risks to the budget from state-owned enterprises in the transport and energy sectors. Medium-term fiscal pressures related to the health sector will also need to be addressed."
Press release
© International Monetary Fund
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