The three-year budget forecast, adopted these days by the government together with the major macroeconomic parameters displays moderate optimism. At the same time experts of Bulgaria’s largest bank stated that 2018 would be a record year in terms of economic growth – 4.4%, while the government talks on barely 3.9%. One way or another, such achievement would place this country among Top 3 EU member-states. The Central Bank takes similar stance, as it is also quite optimistic about economic growth through the year, foreseeing 4.2%. At the same time the unilateral opinion is that a gradual decline of the economic growth pace will follow from now on, but it will still remain good – 3.8% and 3.7% for the next two years.

Inflation will be accelerated this year and by the end of the 3-year-long forecast period, but without imposing a threat on the purchasing ability and living standard of the population – it won’t exceed the quite moderate 1.9% at the end of the period. This level is good for the economy, especially against the current deflation, discouraging businesses. Salaries will go up as well along deflation and GDP growth, especially the minimum wage, set by the government. It is EUR 260 now and as of January 2021 it should be EUR 305 per month. This increase results automatically in the growth of social payments and indirectly into an increase of salaries in the non-governmental sector. Those have been growing by some 10% per year so far and this growth will most likely be preserved due to the 1:5 ratio, as far as wages in Bulgaria and Europe are concerned. This gap has to be caught up with, one way or another, as imposed by economic logics. It is essential to remind here that the GDP share of the consolidated state budget (the money taken by the state from citizens and businesses in the form of taxes and then re-allocated in the form of state subsidies and aids) has been gradually reducing and will reach 36.1%. This decline means that the state provides even greater freedom to business and citizens to manage their finances the best way they can. The trend is positive, given the preserved level of the current taxes, or to be more precise – of 10% flat tax for business and persons.

Positive development is also expected in regard to state debt, which will gradually decrease to the level of some 18% of GDP. This extremely good economic achievement places Bulgaria on top of the list of the least indebted European countries. Experts think that the credit rating of the state should be set higher as well. Furthermore, the budget deficit is to disappear gradually in 2020, when the incomes and expenses of the country will be equalized.

The government’s more moderate forecasts on the economy’s development are explained with the exhaustion of internal consumption’s capabilities to push GDP up. This is tightly related to one of the major problems which are yet to find its solution – the lack of manpower and labor market’s overheating. The level of unemployment is expected to reach 5.7%, and even further down to 5.4% over the past year of the mid-term forecast. Economic growth usually comes with capital growth and employment growth too. It turns out however that Bulgaria has no free manpower to provide the further growth. That is the reason why those in charge are quite moderate optimists in regard to the future of the national economy.

English version: Zhivko Stanchev