03.09.2013

* 2013 growth seen lower at 0.6-0.8 pct

* GDP to rebound 1.8 pct in 2014

* Budget gap stays at 2 pct this year, seen down in 2014

* Very likely to issue international bond next year

By Zoran Radosavljevic

BLED, Slovenia, Sept 2 (Reuters) - Bulgaria\'s economy will grow less than forecast this year but should pick up pace in 2014 when government reforms start yielding results, the finance minister of the European Union\'s poorest member said on Monday.

The Socialist-led government would this year keep the budget deficit within the two percent limit and bring it down in 2014, Petar Chobanov also said, speaking on the sidelines of an international business forum in Slovenia.

\"For next year, because of expected improvements in economic conditions, we will have lower deficit,\" he said.

Last month, the government revised the 2013 budget to raise the deficit to the maximum allowed by law to spur the economy and help the needy, overturning a president\'s veto on the raise.

Bulgaria needs to run small fiscal deficits to protect its currency peg to the euro, as it operates under a regime that does not allow the central bank to set interest rates and leaves fiscal policy as a tool to influence the economy.

Thousands of Bulgarians have held nearly nine weeks of protests in the capital against alleged government corruption. The protests have eased in August but are expected to gain speed again this week, as parliament resumes its work.

Recent opinion polls show the cabinet has the lowest support levels since 1997 and some political analysts say it is not likely to survive its full-term.

PROMISING SIGNS FOR 2014

Chobanov declined to give a concrete budget figure but said fiscal consolidation was based on improved economic performance and \"implementation of some measures to improve tax collection, avoid tax evasion\", rather than on spending cuts.

\"There will be no austerity. We are trying to have in parallel good fiscal policy and restart growth.

The government\'s new economic forecast, due later this month, will cut the growth projection to \"probably around 0.6-0.8 percent\", from 1.0 percent previously, he said. The statistics has shown meagre growth of 0.4 and 0.2 percent in the first two quarters, after a full-year 0.8 percent growth in 2012.

He put it down to unfavourable business conditions in Bulgaria and the rest of the European Union and political instability in the country, which forced ordinary Bulgarians to spend less and turn to saving instead. 

There were already promising signs for the second half of this year, with a good tourist season and solid outlook for the agriculture, Chobanov said.

\"For next year, we stay with the current forecast of 1.8 percent. We think we\'ll have improvements in domestic demand because we are expecting improvements in business environment will lead to more investments.\"

Bulgaria was determined to tap the international bond markets next year. 

\"For next year, it is clear that we\'ll go to international financial markets because we have a global bond to repay in beginning of 2015 and we need to have the money beforehand,\" he said.