19.01.2016

"I continue to believe that there is a potential for higher growth than the one shown in our projections at the moment although there are a lot of speculations whether our economy is assigned too ambitious tasks or not", was the comment of Minister of Finance Vladislav Goranov on the issue of the economic growth during the 10th annual meeting of businesses and government, which was organized by the "Capital" newspaper under the heading "Bulgaria under the conditions of global insecurity. Risks and possibilities for the economy".

According to Goranov, growth will be in the range between 2 and 3%. If confidence is restored, there is a potential for more solid growth. Nominal investments, in the form of government expenditures, in 2016 will probably not be as high as in 2015 but our country is about one year ahead in its preparedness for the new programming period, the Finance Minister pointed out and added that "we should work and actually absorb the EU funds which are the prevalent part of the investment resources that the government allocates". "Based on commitments made, there are approximately 1,900 contracts for rehabilitation of buildings. These engage about BGN 1 billion which in the next few months can potentially pass through small and medium enterprises in the form of economic turnover and additional investments", Goranov said to businesses.

In his short economic analysis Minister Goranov drew the general conclusion that the world commodity turnover was expected to slow down and the contribution of the net exports of the Bulgarian economy to growth to be potentially more limited as compared to 2015. In his opinion, however, we have big reserves exactly in this part of the GDP structure which is most difficult to influence and requires most time to activate as a factor, namely final consumption. "It requires long-term stability, a feeling of perspective in the ordinary economic entity and presumes rational behaviour as a result of the overall economic and political environment in which we are living", the Finance Minister said. 

We should be particularly cautious about the quick increase of the government debt, Vladislav Goranov warned again. He said that "if there is no consistent policy on reducing deficit for a number of years ahead and if we each time ask ourselves the question what should be the level of deficit and until when we can have a deficit, the issue of debt will always emerge and one day, in order to solve it, we will reach the issue whether the tax system is appropriate to finance the so structured state". According to Minister Goranov, our tax system can cope with this if we avoid making any populist decisions and transferring to the fisc any additional deficits which are external to it.

Asked about the state of the energy system, the Finance Minister said that "if we eliminate the perception that energy is an element of the social policy and start working in accordance with market principles, we could overcome those wrong decisions of the past which have led to the accumulation of huge deficits in this system". He expressed the opinion that the temptation to make populist and non-market decisions in the energy sector was enormous and if the fisc were to be used to secure them, the debt and tax system issues would come up even more sharply. Minister Goranov firmly said that the easiest and the most unsound decision would be to start changing the tax system right now; he was positive that in view of the overall political commitment at the moment he didn't see any risk such thing to happen.

The Finance Minister was confident that our country was to go through the catharsis of the bank asset quality review in order the confidence in the financial system to be restored. As regards the forthcoming stress tests in the financial system, Goranov said that he expected the banking sector to be a little bit more conservative and cautious which would stagnate lending. In connection with the announcement made during the forum that the IMF and the WB have confirmed that they would make an assessment of the financial position of the country after the finalization of the stress tests in the banking sector, Minister Goranov clarified that expert teams of the two institutions would verify the individual elements of the financial system - on the one hand as regulators, and on the other hand as companies, as businesses operating in that sector - and would provide an overall assessment as to the position of our country according to their standards. What is valuable, according to the Finance Minister, is that it would serve as a benchmark for the external environment, would be accepted with high level of confidence by investors and the ones that monitor the Bulgarian financial sector.

Asked to comment the future membership of Bulgaria in the euro area, Minister Vladislav Goranov explained that "Europe is now suffering a solidarity crisis which is not so much related to the problems with refugees but rather to the post-financial crisis imbalances in some euro area member countries which they have not yet overcome and which they do not want to overcome at the pace which Germany, for example, would like to see. This creates distrust in the euro area and pushes the idea of its enlargement into the background". According to the Finance Minister, Europe is structured into three circles and our country is only admitted to the first one. "There are two more steps on this path and we will not skip them; before reaching the euro area, we have to go through Schengen", Goranov said.

"It is very important that we, while in a favourable economic cycle, do not needlessly allow any political instability, frivolously reverse the cycle or alarm the economic entities and deprive them of their perspective", the Finance Minister was firm.