On his first day in the job, Bulgaria's interim finance minister deepened the country's gloom by cutting the forecast for 2013 economic growth to 1-1.5% from the previous government's forecast of 1.9%. The move piles greater pressure onto the temporary administration to stick with austerity amidst continuing protests.
Kalin Hristov - on leave of absence from his position as central bank deputy governor to join the interim government appointed by President Rosen Plevneliev to run the country until a May election - said the cut in the forecast was due to primarily to falling exports coming on the back of the Eurozone crisis. "This is conditional, assuming that the Eurozone - which is Bulgaria's key trading partner - would start recovering in the second half of the year," Hristov told reporters.
The economy of the EU's poorest state expanded by just 0.8% last year, which contributed to the sense of deepening economic despair that has manifested itself in protests against low living standards and high utility prices. Those events led to the downfall of the centre-right government led by Boiko Borisov in February, which was harshly criticized at home for austerity efforts which had impacted much of the population.
However, Hristov, the finance minister in a temporary administration led by interim Prime Minister Marin Raykov, promised to continue efforts to ensure financial stability. While the Borisov government's freeze on public sector wages and pensions is hugely unpopular amongst Bulgarians, analysts and investors welcomed the efforts which, so far, have managed to maintain a low budget deficit and external debt levels. They are now calling for the interim government to stick to the course, despite the risk of increased instability.
IHS Global writes in a note: "The caretaker cabinet should reassure investors concerned about potential moves towards more populist policies and a departure from conservative fiscal policy. At his inauguration yesterday, Raykov stated that his cabinet would follow the 2013 budget arrangements and take no steps to undermine Bulgaria's currency board with the euro."
"Nonetheless," the analysts caution, "Raykov offered hope to citizens frustrated and angry about stagnant living standards and wages by stating that his cabinet would seek to improve pensions and support for the poorest with any available reserve funds. The caretaker cabinet's influence is significantly limited by the election in May. Nonetheless, the broad and technocratic makeup of the interim administration should succeed in preventing an escalation in public protests before the ballot."
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