Bloomberg News

Bulgarian Parliament Passes 2013 Budget With 1.2% GDP Growth

November 08, 2012

Bulgaria’s Parliament approved the first reading of next year’s budget, which targets a deficit of 1.3 percent of economic output and has a 10 percent tax on interest from deposits as spending rises before elections.

Lawmakers in Sofia voted 122 to 60 in favor of the budget, which has yet to pass a final reading item by item, Speaker Tsetska Tsatcheva said in Parliament in Sofia today. The plan assumes economic growth of 1.2 percent under a pessimistic scenario and 1.9 percent under an optimistic one.

“The budget aims to increase people’s incomes next year,” Finance Minister Simeon Djankov told the assembly. “The budget will be implemented with a consistent spending policy and we’ll have one of the three lowest in the European Union levels of debt-to-GDP ratio and deficit.”

Bulgaria, the EU’s poorest country in terms of gross domestic product per capita, weathered the global crisis without borrowing from lenders abroad. Growth slowed to 0.5 percent from a year earlier in the second quarter, the same as in the first three months.

Next year’s budget-deficit target is unchanged from this year. Revenue is estimated at 30.6 billion lev ($20.1 billion) or 37.5 percent of GDP, a 6.4 percent increase from this year. Spending is projected at 31.7 billion lev, or 38.8 percent of GDP, a 6.5 percent increase from 2012.

Credit default swaps, which decline as perceptions of creditworthiness improve, traded at 107 points today, compared with 179 points on Oct. 1.

Accelerating Inflation

The government forecasts average EU-harmonized inflation at 3.4 percent next year, after 2.6 percent this year. The public debt limit is set at 14.6 billion lev, or 17.8 percent of GDP, in 2013.

The government plans to keep personal and corporate income taxes unchanged from a flat 10 percent next year, in an effort to attract more investment and boost growth, according to the budget.

Bulgaria will raise pensions by 9.3 percent, minimal wages by about 7 percent and army salaries by 9 percent next year, Djankov said.

The European Commission raised this year’s economic growth forecast for Bulgaria yesterday to 0.8 percent from a 0.5 percent estimate in March and to 1.4 percent for 2013 from 1.9 percent. The economy grew 1.7 percent last year, after a revised 0.4 percent in 2010.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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