10.04.2013

The European Commission (EC) has confirmed the trend of reducing imbalances in Bulgarian economy. This is evident from the EC review of the macroeconomic imbalances in 13 EU member states including Bulgaria. According to the review, our country is experiencing imbalances that are not found to be excessive. According to the Commission, the major challenges continue to be the risks related to the high level of external indebtedness of the private sector and the process of recovery of the labour market.

The Commission points to the fact that the financial stability has been preserved, as well as that the CA deficit has shrunk to levels close to balance, with adjustment coming from sustained growth in exports to global and EU markets. The expectations are that the CA deficit will be growing smoothly but the chances for reaching the pre-crisis levels are very low. The Commission also registers the reducing indebtedness as a share of GDP and its experts forecast an improved net external investment position of Bulgaria. The Commission also reports the reduced indebtedness of the non-financial sector, although it remains high and poses a potential risk for the economy.

The European Commission is of the opinion that although reduced, the imbalances are likely to persist over the forecast period (end- 2014), and it makes some recommendations to Bulgaria. These recommendations include measures targeted at attracting capital in sectors with high value added, simplification of procedures and better EU funds absorption. As to the labour market, measures need to be taken to support the low-skilled groups of unemployed by applying a sectoral and regional approach. Reforms in the educational systems, especially in higher and professional education, are seen as a key factor for addressing the structural problems of the labour market, especially given the skills mismatches in some sectors of the economy. According to the Commission, in order to reduce the indebtedness of the non-financial sector, it is necessary to improve the efficiency of the judiciary, to enhance the insolvency framework also through the application of out-of-court settlement procedures.

Thirteen EU members are subject to an in-depth review: Belgium, Bulgaria, Denmark, Finland, France, Italy, Hungary, Malta, the Netherlands, Slovenia, Spain, Sweden and the United Kingdom. Excessive imbalances are found in two of them, i.e. in Slovenia and Spain. Urgent reforms are needed there in order to tackle the high risks. Five of the remaining members, i.e. Cyprus, Greece, Ireland, Portugal and Romania, are outside the scope of this review for they are subject to enhanced monitoring through the support programmes, and in the case of Cyprus - through the negotiation of a similar programme. According to the Commission, no imbalances have been identified in the other members that are not subject to analysis.