30 November 2012

IMF: Bulgaria: 2012 Article IV Consultation—Staff Report; Public Information; and Statement by the Executive Director for Bulgaria

Domestic demand gained some traction on improved EU funds absorption and consumption, but the slowdown in external demand led to a negative external sector contribution. With little change foreseen for the second half of 2012, real GDP growth is expected to grow by 1 percent in 2012 and gain pace in 2013 provided external conditions improve.

Strong buffers and steadfast policy implementation have allowed Bulgaria to maintain stability in a challenging environment. The fiscal deficit has continued to decline and is on track to fall below the budget target of 1.5 percent of GDP; public debt is the second lowest in the EU.

Reforms of the public administration and public pension system have contributed to more sustainable public finances over the long term.

Executive Board Assessment

Executive Directors commended the authorities’ prudent policy implementation, which has ensured macro-economic and financial stability in a difficult external environment. Directors noted that this subdued external environment is limiting near–term economic growth and that unemployment remains high, especially among the young and low–skilled.

Directors broadly agreed that the currency board arrangement has served Bulgaria well. They welcomed the fiscal adjustment that has been achieved, with the budget currently close to structural balance, and encouraged the authorities to preserve this achievement in the forthcoming election year.

Directors observed that the financial system is stable with high buffers but that the low growth environment poses challenges.

Directors considered that improving the composition of the budget, through increased spending on infrastructure investment and active labour market policies, would support growth.

Press release

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