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2017 draft budget plans economic growth slowdown and projects zero new debt

Thursday, Nov 10, 2016

Bulgaria's Ministry of Finance has just published the 2017 draft state budget. However, the country's state budget will be subject to a series of discussions, debates, proposals and demands, before it is officially adopted by the country's National Assembly. The draft budget of Bulgaria's Ministry of Finance outlines the main parameters and accents in the state policy and it is unlikely to go under significant amendments until the official adoption in Parliament.

Firstly, according to the 2017 draft state budget, Bulgaria's authorities are expecting to collect more revenues and make more expenses, as compared to 2016. The Finance Ministry forecasts that the revenue agencies will collect nearly EUR 1 billion more and respectively EUR 1 billion more will be spend in next year's budget. This forecast was made against the backdrop of expected slowdown in the country's economic growth from 2.6% of the gross domestic product in 2016 to 2.5% of the GDP next year. The authorities are not planning to borrow new foreign debt on the international financial markets in 2017. The Ministry of Finance forecasts that the country's budget deficit in 2017 will amount to 1.4% of the GDP. The authorities explain that Bulgaria will spend more next year, because the higher amount of EU subsidies will require higher national co-financing.

The Bulgarian Ministry of Finance clearly outlines the main priorities of the 2017 state budget. These are education, defense, health care and energy efficiency. The authorities are planning to spend more public resource on those fields. Meanwhile, they are not planning to raise taxes, although pension security contributions will increase with 1% as of 2017. The retirement age will also continue to increase with two months each year, as planned. Bulgaria's employers are against the forecasted increase of the minimum monthly salary to EUR 230. In their view, a 10% increase in the minimum wages does not correspond to the expected increase of labor productivity. Despite the planned increase of the minimum salary, Bulgaria will still place last in the EU in terms of incomes. However, it is the right step forward towards reaching the poverty threshold. It would also influence positively local consumption, which is expected to contribute significantly to the growth of the country's gross domestic product.

The 2017 draft state budget is a routine one which counts on stability and foreseeability. Taking into consideration the fragile and export-orientated local economy, however, the well-done estimates of the Bulgarian authorities may suddenly turn wrong.

Source: bnr.bg