The draft state budget bill for this year will be discussed at second reading in the relevant parliamentary committee. It sets a deficit of 4.1% of the expected gross domestic product, which amounts to BGN 5 billion and 900 million.
BIA’s economic advisor Shteryo Nozharov commented the topic for the Bulgarian National Radio:
"It can be said that this is a relatively atypical budget for recent years. This budget aims, on the one hand, to compensate for the lack of an advance in the Recovery and Sustainability Plan, in some way to compensate for the expectations of business, society, for the money that had to come because of the disapproved Recovery and Sustainability Plan.
What seems strange in this budget is that in 2019, when we had a balanced budget deficit, i.e. we had an economic growth rate of 4%. Now, with a 4% budget deficit, we are increasing the rate of economic growth by only 0.8%.
This means that we are pouring money into an inefficient economy that cannot multiply the effect of this large debt. The budget deficit is a debt and a future increase in taxes, as it is difficult to compensate only for economic growth.
Before such a generous budget was made, there had to be talk of economic reforms, reforms in some sectors, and once the money was given and multiplied much more.
Large capital costs in practice serve as a buffer, because they are always realized no more than 60%. That is why an update is planned in the middle of the year to see which of the projects will not be implemented and how to better allocate the money.
Timing
The budget is by definition a financial plan of the state for one year. It is even placed in the context of a medium-term budget forecast of 3 years. And instead of looking at things in a 3-year context, we look at them in some quarters. The budget from last year was in force for the first three months, the budget that is currently being adopted will be in force for the second month, and then an update will be in force.
This creates a big problem first for the business, because the investment plans for the year cannot be made. Foreign direct investors are also confused by these 3-month updates and also can't make plans. This prevents synchronization with monetary policy.
Inflation
"So far, in my opinion, the growth rate of income is ahead of inflation. The rate of income growth has been around 14% in recent years, while the inflation rate expected this year, according to the BNB, is between 7 and 8%.”
