16.11.2011

MRS. PRESIDENT,

MEMBERS OF PARLIAMENT,

COLLEAGUES,

Our main task for next year becomes more and more clear. We must continue pursuing our policy aimed at financial stability.

According to the Autumn Economic Forecast of the European Commission, growth is expected to slow down everywhere in Europe. A new EU recession is highly probable. All expectations for 2012 have been revised downwards. This forecast is favourable to Bulgaria. Our expected growth has been revised from 3.7% down to 2.3% for 2012, which ranks Bulgaria fifth in Europe, with expected EU average growth rate of just 0.6% and six Member States expected to have a negative growth.

Nevertheless, we must act even more conservatively than this conservative forecast. We must not allow any risks.

Right from the start of next year we will find ourselves in the conditions of an effective Financial Stability Pact. The amendments to the Organic Budget Law set limits of 2% deficit and 40% budget allocation. Our major fiscal goal for 2012 will be even more conservative - a CFP deficit of 1.3% of GDP.

Further consolidation will allow us to contain the negative effects of growth slowdown in Europe. Deficit contraction will be attained while preserving the current levels of direct taxes. The lower limit of the fiscal reserve will remain the same as in this year and the previous year, i.e. BGN 4.5 billion.

The slowdown of foreign economies will affect our export rates. We expect a gradual recovery of domestic demand, which will turn into a major growth driver. Inflation in 2012 will be mostly due to domestic demand. We project that it will be around 2.5% at the end of the period.

As to the labour market, we envisage that the number of employed persons will remain stable. Unemployment is envisaged to be kept at this year's levels.

We plan revenues of around BGN 29 billion or 35.2% of GDP. This will be an increase by some 1% in real terms compared to this year. For the projected nominal growth of CFP revenues by BGN 2.52 billion compared to this year we will mostly rely on EU funds and programmes. The nominal growth of national budget revenues is envisaged to be around BGN 850 million compared to this year and will mostly cover the deficit and the necessary co-financing of all EU programmes.

Regardless of the preserved overall level of expenditures, we will provide more funds for education, for EU co-financing, for science and culture in 2012. The sectors that spur economic growth, i.e. construction of road, environmental and utility infrastructure, will receive serious financial support under the operational programmes co-financed by the Structural and Cohesion Funds of the European Union.

The 2012 budget envisages various sources of financing, which will make us flexible in taking decisions. The policy of assuming debt obligations will also be conservative. This will allow us to remain stable in the event of possible external shocks. We have set a maximum debt/GDP ratio of 19% for 2012. We do not expect to reach this figure. We have set it as another cushion.

MEMBERS OF PARLIAMENT,

Financial stability underlies national security. This stability will become a more and more important factor in Europe. We must take account of that.

Let me wish you fruitful debates.