BUDGET 2015: STABILITY OR EXTREME CONSERVATISM AND DENIAL OF REFORMS?

At the end of last week the Bulgarian Ministry of Finance presented its version of the state budget for next year. This happened just a day after the budget for the current year was revised.

What do government financial experts plan? Minister Vladislav Goranov says this is reassurance and stability. Excessive conservatism, extreme pessimism and lack of any reforms characterize the budget, according to trade unions, economists and employers on the other hand.

The budget framework gives grounds for both opinions, depending on the perspective of the viewer seeing the figures and indicators.

 The planned growth of the gross domestic product is the most important factor that has effect on all others. Next year growth will be twice as less as this year’s. It turns out that in 2015 economic growth will shrink by half and will not have any tangible effect on living conditions and government revenues. This is evident from the fact that government spending is planned to rise by just 50 million euro, while the minimum wage will rise by 20 euro. Salaries in the sector of public administration will be cut by 10 percent. These plans can hardly cause a standing ovation and trade unions even threatened to start strikes.

At the backdrop of almost frozen government spending, public debt will grow by 4 billion euro. However, in 2015 budget deficit will be reduced to the healthy 3 percent limit set by Brussels. Inflation is expected to reach 1% and fears of deflation will end.

The stern conservatism of the government finds expression in planned reforms but it is unclear whether financing will be enough. Planned reforms in the financially-troubled Ministry of Interior, the State Agency for National Security (SANS) and Ministry of Defense are shy, while reforms in healthcare are yet to be discussed. Reforms in the pension system are expected to have long-term effects. Discussions over the judicial sphere also continue.

It is true that the government that came in power less than a month ago did not have any time to express their ideas for reforms in the budget, having been forced to work mainly with analyzes and forecasts prepared by the previous cabinet. It is also true that after almost two years of social unrest, political instability and destructive confrontation society needs reassurance and stability. It is also true, however, that political and social unrest were largely caused by the lack of reforms and measures to improve public and social systems. There is a risk that the new delay of dealing with urgent problems may make them worse. The indecision of the new government also shows that it is not sure if it would be able to withstand social pressure that radical and unpopular reforms could cause.