Bulgaria's budget deficit widens to 1.4% of GDP at end-July, likely to exceed 1.8% full-year target

By bne IntelliNews August 21, 2014

Weak revenues and limited access to EU funds boosted Bulgaria's general budget deficit to 1.4% of GDP at end-July, uncomfortably near the 1.8% full-year target, data from the finance ministry showed.

The budget gap widened to BGN 1.15bn (EUR 586.6mn) in the first seven months of 2014 from just BGN 168mn a year earlier, prompting Bulgaria's caretaker government to draft a budget revision it plans to submit to the future parliament, the ministry said.

The interim cabinet intends to improve revenue collection and unfreeze some of the structural funds the EU has suspended in order to contain the deficit within the EU’s 3% ceiling.

Budget revenues rose 1.4% y/y to BGN 16.8bn in Jan-July, equal to 54.3% of the full-year target. Lower-than-planned income from VAT and excise duties poses a risk to the BGN 31bn full-year revenue target.

Meanwhile, expenditures increased 7.2% y/y to BGN 17.9bn as the government uses money from the national budget to compensate for expenses that are usually covered by the EU's operational programmes. Bigger transfers to the healthcare system and a base effect related to the pensions hike from April 2013 have also contributed to the faster growth in overall expenditures.

The caretaker government has announced plans to tighten control over spending but is convinced that this year’s budget deficit will be beyond the original plan.

Bulgaria could get a revised budget framework only after October 5 when the nation is set to elect new parliament in snap polls.

Bulgaria's general govt budget, BGN mn Jan-Jul 2013 Jan-Jul 2014 Change, y/y
  Revenues and grants 16,609.9 16,840.5 1.4%
  Tax revenue 12,852.2 13,190.5 2.6%
  Non-tax revenue 2,424.3 2,223.7 -8.3%
  Grants 1,333.3 1,426.3 7.0%
Total expenditures 16,778.0 17,987.8 7.2%
  Expenditures 16,172.8 17,372.5 7.4%
  Contribution to the EU budget 605.2 615.3 1.7%
Budget balance -168.1 -1,147.3 582.5%
  % of GDP 0.2% 1.4% /
Source: FinMin      

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