Despite the unsettled political situation, macroeconomic and financial stability in Bulgaria has been maintained, the IMF said in a statement following its regular staff visit to the country. Domestic uncertainty and global market turbulence in recent weeks have so far had only a limited market impact on Bulgaria, with bond yields and credit-default swap spreads remaining in line with other strong performers in Eastern Europe, the IMF noted.

The IMF welcomed the planned increase in targeted social protection but only within the existing budget envelope. Commenting on the recently announced plans for budget revision, the IMF said that the 2013 budget deficit target is achievable and advised that any revenue shortfalls or delays in the reimbursement of EU funds should be accommodated and not offset by lower spending. The country should continue with the fiscal consolidation, as described by the EU's Convergence Program, the IMF said. However, the government's plan to freeze the process of raising the retirement age and change the pensions indexation rules would ply deterioration in the sustainability of the pension system and would put pressure on the public spending amid aging population and continued emigration.

Bulgaria's economic growth will improve only marginally in 2013, according to the IMF. Rising exports and higher absorption of EU funds is what helps the economy grow. The IMF welcomes plans to reduce the administrative burden to businesses and to increase the efficiency of public services. Programmes that address skills mismatches are of key importance in the fight against unemployment. But the Fund advised the government to consider the negative implications of higher minimum wages and minimum social security thresholds on employment.

The financial system is stable and well capitalised. Non-performing loans are provisioned and liquidity remains high, as a result of low demand for credit and continued deposit growth, the IMF said.

The IMF's 2013 Article IV mission will take place in the autumn.