At an extraordinary sitting on Sunday the Bulgarian cabinet adopted the 2019 state budget draft. Premier Boyko Borissov described the new budget as one of the most-ambitious state budgets since the beginning of the transition from communism to democracy and added that Bulgaria has never been in a better condition before. Muravey Radev who served as a Minister of Finance during the cabinet of the Union of Democratic Forces made a similar assessment of the 2019 state budget. In his view, the 2019 budget is not only the most generous of all previous budgets, but is also very well-balanced, because it redistributes more money and envisages a very low budget deficit (0.5% of the GDP). Moreover, the government is not planning to increase taxes. The debates on the 2019 state budget which precede voting of the budget itself are yet to be held at the Bulgarian National Assembly. However, no substantial amendments to the budget are expected to be made.

The expenses in 2019 are planned at EUR 22.730 billion, which is EUR 2.607 billion more as compared to 2018. The growth of the gross domestic product is projected at 3.7% and the average annual inflation is expected to reach 3%.  Unemployment is expected to stand at 4.8%. In other words, the expectations of the government about the development of the country’s economy in 2019 are quite optimistic.

The generosity of the government is quite visible in three spheres – social policy, education and defense. In the beginning of 2019 the minimum monthly salary in Bulgaria will rise from EUR 261 to EUR 286. The government is planning to increase wages in the state and public administration with 10% on average. The salaries of the Bulgarian teachers will see a 20% increase. Pensions will increase with 5.7 % on July 1 next year. As a result, the cost of labor will increase with 8.4% on average, which is way above the projected inflation in Bulgaria. These measures are expected to boost local consumption which is among the main engines of economic growth in this country together with exports. The labor unions in Bulgaria welcomed these measures and added that they have not seen such a socially-orientated budget for a long time. However, the Bulgarian employers do not agree with the plans of the cabinet to increase the minimum salary from EUR 261 to EUR 286 and the maximum monthly contributory income level from EUR 1,300 to EUR 1,500. Moreover, the business insists that the first three days of the employees’ sick leave should not be paid by the employers anymore. The business contends that the 2019 state budget does not encourage economic growth.

Despite the planned wage increases, the Bulgarians will remain the poorest citizens in the European Union where incomes are several times higher. However, the 2019 state budget shows that the Bulgarian government is making efforts to shorten this gap and voiced expectations that wages in the private sector will also continue to increase. This is very likely to happen, taking into consideration the fact that the Bulgarian business has been experiencing a sharp deficit of manpower. According to official statistics, the salaries in the private sector have been increasing with an average of 10% in the recent years.

The political parties reached a consensus that the money spent on defense should increase and that this country needs to modernize its armed forces. Bulgaria has not yet met the NATO standard according to which a minimum of 2% of the gross domestic product is spent on defense, but made an important step forward in this direction, because over EUR 2.505 billion will be spent on defense from the 2019 state budget, which is EUR 245 million more as compared to 2018.

A former finance minister in Borissov 1 cabinet once described the country’s budget as meatless pizza. However, next year’s pizza (the 2019 state budget) looks much more nourishing. Bulgaria’s Minister of Finance Vladislav Goranov voiced expectations that the country’s credit rating will increase soon which would be very good news for the foreign investors.

English version: Kostadin Atanasov