bne -

Forecasting slower economic growth, Bulgaria's finance ministry published on July 16 the draft of the planned budget revision raising the 2013 deficit target to 2% of GDP from the previous 1.3%.

"The revised forecasts for 2013 are for economic growth of around 1%, which is a more pessimistic scenario compared to the provided for ... 1.9 %," the ministry said in a statement on its website.

In nominal terms, the new deficit target is BGN493m (€251m) higher than the one currently envisioned by the budget, drafted by the government of former prime minister Boiko Borissov and passed by the previous parliament, which fell earlier this year in the midst of mass protest against rising power prices.

Since the new government took office in late May, the streets have been regularly filled with demonstrators once more, with a wider call for the political system to be cleaned up having taken precedence. It's little surprise then that Prime Minister Plamen Oresharski is looking to offer a more populist fiscal stance. The budget gap, however, will remain within the European Union's required threshold of 3%.

The enlarged deficit will mean extra debt financing of up to BGN1.0bn, the ministry added. However, it also stressed that will not push total state debt past the limit of 14.6bn set in the budget.

According to Tim Ash of Standard Bank, the move should not be too worrisome for investors, as Bulgaria's public finances still are the envy of many in the EU. "They have a public debt/GDP ratio of around 17%, i.e. less than one quarter of the EU average, and have a wad of cash in their fiscal reserve still of around €2bn, or around 5% of GDP, so their financing position is pretty strong."

In fact, the analyst suggests "the only surprise is that the new centre left BSP-led government, and the former GERB government, did not resort to a looser fiscal stance prior to now to try and stimulate growth - and mindful still of the persistence of street protests across the country and against the political class more generally."