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Oct. 31 (Bloomberg) -- Bulgaria’s government approved a draft budget for next year aimed at cutting the country’s deficit, to contain the impact of the euro area’s sovereign-debt crisis and to ensure 2013 debt repayments.
The draft forecasts economic growth of 2.9 percent, a budget deficit of 1.35 percent of gross domestic product and average inflation of 3.2 percent in 2012, Finance Minister Simeon Djankov told reporters in Sofia today. Parliament has yet to vote on the draft. This year’s growth is estimated at 2.8 percent and the budget deficit at 2 percent of GDP.
“It’s going to be a financially difficult year,” Djankov said. “The budget is estimated to work even if economic growth is slower than the macro-economic forecast. If growth slows to 1 or 2 percent, we can still make it work.”
Bulgaria, the European Union’s poorest country in terms of economic output per capita, weathered the global crisis without borrowing from international lenders. The country narrowed this year’s budget gap from 3.9 percent of GDP in 2010. The government will keep corporate and personal taxes unchanged at 10 percent next year, the lowest in the EU, Djankov said.
“This a tight budget, which will enable us to meet debt repayments in early 2013,” Djankov said.
Bulgaria may sell securities worth as much as 2 billion lev ($1.43 billion) on global markets, to repay 1.8 billion lev of global bonds maturing in January 2013, he said, adding that the same option existed in this year’s and last year’s budgets and wasn’t used. Next year’s public debt is likely to rise to 15.3 billion lev, or 18.7 percent of GDP, from an estimated 16 percent of GDP this year, according to the budget draft.
Bond Sale Planned
The government plans to sell 1.2 billion lev of bonds on the domestic market, according to the draft. It sold 514 million lev of bonds between January and July this year.
Next year’s spending is set at 35.4 percent of GDP, or 29 billion lev, after 35.7 percent this year, while revenue is estimated at 28.7 billion lev, or 35.2 percent of GDP, after 34.2 percent in 2011, according to the budget.
Bulgaria’s economic recovery slowed to its weakest in three quarters from April to June, as Europe’s sovereign-debt crisis damped demand from the country’s main trading partners, which buy about 60 percent of its exports.
Second-quarter gross domestic product rose 1.9 percent from a year earlier, after a 3.4 percent expansion in the previous three months.
Djankov cut the forecast of next year’s growth to 2.5 percent on Oct. 11, from an April estimate of 3.6 percent. The European Bank for Reconstruction and Development reduced its 2012 growth forecast to 2.3 percent, from 3.7 percent, on Oct. 18. The Institute of International Finance said on Oct. 17 that its 2012 growth outlook for Bulgaria was 2.2 percent, up from this year’s estimate of 1.9 percent.
--Editors: Alan Purkiss, Chris Peterson
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