Bulgaria's 10-month budget deficit overshoots full-2014 target by 0.4pps

By bne IntelliNews November 11, 2014

Bulgaria's 10-month budget deficit equalled 2.2% of GDP, which compares to a full-year target of 1.8%, according to preliminary finance ministry data.

The new minority cabinet, which is reluctant to cut spending and also has limited capacity to boost revenue, plans to soon ask the parliament to approve a higher 2014 deficit target of 3.7%/GDP.

The cabinet of PM Boyko Borissov has not said when it plans to bring the projected deficit within the EU's 3% ceiling. Breaching EU budget rules could prompt the European Commission to open an excessive deficit procedure against Bulgaria.

The government spent BGN1.78bn (€907.5) more than it collected in revenues in January-October, which compares to a gap of BGN443mn a year earlier. Revenues rose 1.1% y/y to BGN24bn, but expenditures (contribution to the EU budget included) advanced 6.6% y/y to BGN25.8bn.

The finance ministry blames overly optimistic revenue planning and higher spending for the deficit increase. Income from VAT, excise duties and corporate taxes is underperforming, while social-welfare spending is growing faster than projected. The use of national budget money to pay for expenses that are usually covered by the EU's operational programmes has also contributed to the unplanned growth of the deficit.

Bulgaria's general govt budget, BGN mn Jan-Oct 2013 Jan-Oct 2014 Change, y/y
Revenues and grants 23,751.3 24,004.0 1.1%
Tax revenue 18,470.6 19,151.0 3.7%
Non-tax revenue 3,201.9 2,978.0 -7.0%
Grants 2,078.8 1,876.0 -9.8%
Total expenditures 24,194.2 25,779.0 6.6%
Budget expenditures 23,404.3 25,036.0 7.0%
Contribution to the EU budget 789.9 743 -5.9%
Budget balance -443.0 -1,775.0 300.7%
% of GDP -0.6% 2.2% /
Source: FinMin      
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