Bulgaria's January-September budget deficit exceeds full-year target

By bne IntelliNews November 3, 2014

Bulgaria's nine-month budget deficit reached BGN1.48bn (€758.mn), or 1.84% of the projected economic output for 2014, suggesting that the shortfall will most likely exceed 1.8% of GDP this year, which still is the government's target.

Bulgaria's fiscal challenges have remained undressed so far. The interim cabinet has refused to prepare contingency measures to ensure that budget targets are met and embraced instead the decision of proposing raising the 2014 deficit limit to 4% of GDP. Meanwhile, the leaders of parties that won representation in the new parliament, who are busy negotiating a cabinet, have not yet proposed any revenue or spending adjustments.

Bulgaria's government ran four consecutive budget deficits beginning in 2009, causing the total public debt to rise to 17.9% of GDP at end-2013, and 2014 will be the fifth year in which the government fails to balance its budget. The interim cabinet has forecast the public sector debt to surge to 28.4% of GDP as of end-2014.

The latest budget deficit figures released by the finance ministry suggest that Bulgaria will most likely miss its deficit target for this year by a margin of at least 1.5pps. Revenue grew by only 1.2% y/y to BGN21.5bn in January-September, adversely affected by lower-than-planned income from VAT, excise duties and corporate tax.

Meanwhile, total expenditures (contribution to the EU budget included) increased 6.3% y/y to BGN23bn, mainly due to the national budget transfers used to pay 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 expenditures, the finance ministry explained.

Bulgaria's general govt budget, BGN mn Jan-Sept 2013 Jan-Sept 2014 Change, y-y Change, y/y
Revenues and grants 21,307.9 21,555.7 247.8 1.2%
 Tax revenue 16,523.3 17,074.9 551.6 3.3%
 Non-tax revenue 2,919.3 2,697.9 -221.4 -7.6%
 Grants 1,865.3 1,782.9 -82.4 -4.4%
Expenditures 20,921.3 22,338.6 1,417.3 6.8%
 Wages and salaries 3,214.8 3,328.6 113.8 3.5%
 Social and healthcare expenditures 1,000.4 1,030.9 30.5 3.0%
 Maintenance 3,222.9 3,189.5 -33.3 -1.0%
 Interest expenditures 654.9 510.8 -144.1 -22.0%
 Social expenditure, scholarships 9,491.4 10,127.2 635.8 6.7%
 Subsidies 927.7 1,130.4 202.7 21.9%
 Capital expenditure and net state reserve gain 2,409.2 3,021.1 611.9 25.4%
 Contribution to the EU budget 747.1 700.3 -46.8 -6.3%
BUDGET BALANCE -360.5 -1,483.2 -1,122.7 311.4%
Source: FinMin        

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