19.04.2011

The Ministry of Finance of the Republic of Bulgaria just released its 2010 annual Fiscal Review report. This is the first edition of Fiscal Review, prepared by the recently-established Fiscal and Social Analysis and Forecasing Department of the Ministry of Finance. The analysis centers on the current state of public finances in Bulgaria, as compared to that of other EU Member States, the country-level fiscal effects of the international economic crisis, and the 2010 government policies to improve the medium and long term sustainability of the national budget.

The main findings of the report are:

• In 2010 the Bulgarian government preserved a low budget deficit without increasing the tax burden, thus allowing Bulgaria to remain the country with the lowest direct taxes, and one of the countries with the lowest overall tax burden in the EU.
• International financial markets advanced a positive outlook on the sustainability of Bulgarian public finances during 2010, as judged by CDS dynamics and international credit ratings.
• National fiscal policy tightened in 2010 (per cyclically adjusted deficit measures). This policy aimed to stabilize the deficit and to maintain the internal and external financial stability of the country.
• While in 2010 budget revenues continued to decline, they declined less than in 2009, the total reduction in tax revenues reaching 5.7% (from - 9% in the previous year on 2008 basis). This reduction is a logical consequence of the dynamics of economic activity that occurred during the year.
• Budget expenditures grew by 4.1% year on year basis (consolidated budget). The increase was due to the larger current expenditures (by 5.6% yoy), which was chiefly due to the operation of automatic stabilizers, through increased spending on unemployment and social benefits.
• The budget deficit on a cash basis reached 2.8 bln. BGN in 2010 (3.9% of GDP). It was financed by reducing the fiscal reserve by 1.6 billion and by issuing new debt of 1.1 billion BGN, mainly on the domestic market.
• In 2010 the government started a series of anticipated reforms in the pension system and the public health care system, to alleviate their medium-and long-term impact on public finances and public debt.