04.04.2014

State capital expenditure will be around 6% of GDP on average each year in the period 2015-2017, thus supporting the macroeconomic scenario which plans growth acceleration. This is what Minister of Finance Petar Chobanov said at the presentation of the medium-term budget forecast for the period 2015-2017. The paper aims to present the Government's vision of the financial provision of the underlying objectives and the implementation of the measures set in the Programme "State government, development, fairness - economic and social priorities of the Government of the Republic of Bulgaria". Minister Chobanov added that additional BGN 300 million were proposed at this initial stage of the 2015 budget procedure for municipal projects to be financed by the Growth and Sustainable Development of the Regions Public Investment Programme. Concerning the municipal budgets, a further resource of around BGN 100 million was planned for the increase in the uniform expenditure standards, the equalizing and the capital subsidy, the snow-cleaning subsidy and the money for municipal roads. Minister Chobanov added that the policies launched with the 2014 budget would continue. He specified that the forecast planned an additional resource of BGN 100 million in the form of government investment loans to be used for the Transit Roads V Programme which would end in 2016.

Mr. Petar Chobanov said that for the first time in the recent years the cash-basis deficit at the end of last year, which was 1.9% of GDP, was higher than the accrual-basis deficit by 0.4% of GDP. This was due to the policies taken by the Government to pay old commitments to the business and EU fund payments. "This resource thus helped the economy, resulting in the higher economic growth in the last quarter of 2013", Minister Chobanov explained. This resulted in a positive review of the GDP growth forecast for 2014 by 0.3 percentage points up to 2.1 per cent.

In addition to state capital expenditure, EU funds are fundamental to the economic growth. Mr. Chobanov commented that the year 2014 would not be a zero one for the absorption thereof as funds from the programming period 2007-2013 were paid now under the n+2 rule. The Minister added that the funds under the new programming period would also start to be paid but they would be mostly related social projects in connection with the unemployment decrease programmes.

The social direction also has its key place and role as financial resource and measures, added Minister Chobanov. He said that no social payments would be frozen in the following years but on the contrary, the policy for allocating additional resources in this area would continue. As an example he gave the Swiss rule for pension increase. As a whole, further BGN 265 million would be allocated for pensions in 2015. Easter and Christmas bonuses for pensioners of BGN 100 million would also planned in the 2015 budget. The medium-term budget forecast also plans an increase in the minimum wage so as to reach BGN 450 in 2017, and the minimum insurable income increasing up to BGN 3,000. The Minister of Finance added that the allowance for disabled children would increase to BGN 270 in 2015. The social policy priority for the next three years would be to improve the living standard of the population, with expenditure mostly being allocated for decrease in unemployment and support to the population in higher age groups. The Guarantee for Youth Programme of the EU would continue as well as the support for employing recently graduated and inexperienced young people.

The Minister of Finance also said that the additional funds of BGN 100 million would be secured for structural measures and education development programmes. BGN 78.6 million would be directed to measures for improving the quality of education and ensuring access to education in all regions country-wide. The implementation of the measures for linking subsidies for higher institutions to the overall assessment of the quality of education and the compliance with the labour market needs would continue, with the funds of BGN 21.4 million needed for this purpose having been estimated in the budgets of the higher institutions, said Mr. Chobanov.

The medium-term budget forecast says that the prudent fiscal policy of moderate budget deficit decrease is an expression of the Government's will to maintain fiscal and budget discipline. The fiscal stance for the period of 2015-2017 plans a CFP deficit of 1.5% of GDP for 2015, 1.1% of GDP for 2016 and 0.9% of GDP for 2017. The overall CFP revenues in the period 2015-2017 are planned to be around 37-38% of GDP with preserving the tax and insurance policy. CFP expenditures for 2015 are at 39.6% of GDP, and 38.3% and 37.9% of GDP for 2016 and 2017 respectively. The gradual budget deficit decrease is thus ensured in the medium term.

The nominal level of government debt in the next three-year period is expected to be around 20.1 - 22.9% of the planned GDP and at the end of the period it is expected to stabilize at around 20.1%. A key prerequisite for the increase in government debt in 2014 and 2015 is the greater need for securing funds for refinancing of circulating debt (the years 2015 and 2017 loaded with amortization payments), financing of budget deficits and maintaining of an optimal level fiscal reserve as an anti-cyclical instrument for meeting the current liquid imbalances.

The medium-term budget forecast for the period 2015-2017 has been developed on the grounds of the requirements of the Public Finance Law, the 2015 budget procedure and the information received from first-level spending units and is based on the assumptions for the key external environment indicators of the European Commission and of the Ministry of Finance of the Republic of Bulgaria. The approval of the forecast puts an end to the first stage of the 2015 budget procedure.

The 2014 Update to the National Reform Programme has been drafted by the Ministry of Finance in close cooperation with the ministries and the state administration institutions. The 2013 recommendations of the European Commission have also been taken into account.