The general budget posted a deficit of BGN 732mn (EUR 374.3mn) in the first two months of 2013, up by 29.6% y/y, according to preliminary data of the finance ministry. The gap widened to 0.9% of the full-year GDP projection from 0.7% in both January 2013 and February 2012. The deterioration came mostly on the back of 7.4% annual increase of budget expenditure likely related to larger interest payments in the first months of the year.

Budget revenues increased by 14.5% y/y in February alone, supported by rapid growth of tax proceeds. The revenues will continue to grow at a higher rate till April when the deadline for reporting the annual income of companies and individuals expires.

Total expenditures (including the country's contribution to the EU budget) went up by 9.1% y/y in February. They will rise further with the 9.5% pensions increase that came into effect as of April 1. Furthermore, in March the caretaker government decided to cut on administrative expenses and allocate BGN 40.9mn (EUR 21mn), amounting to approximately 0.05% of the projected GDP, to the poor and the unemployed. Although this measure is not going to generate a higher budget deficit, as promised by the ministry, it is likely that certain changes in the budget structure will be observed.

The general government budget ended 2012 with BGN 350mn (EUR 179mn) deficit, representing 0.5% of GDP. Bulgaria will target a 1.3% of the projected full-year GDP budget deficit in 2013, according to 2013 budget law.