LM Legal Services Blog

Bulgaria has a budget surplus but it can easily slide into a budget deficit of 1.5% of the GDP, according to the Italian Unicredit Group. The recession in Bulgaria is inevitable and will last 2 years, say the analysts. According to the expectations, the country’s economy will shrink by 3% in 2009 and by another 1% in 2010. It is expected that the budget will move from 3% surplus in 2008 to a 0.4% deficit in 2009 and a deficit of 1,5% in 2010.

The inflation is expected to fall to 3.5% for 2009 and to 1,8% in 2010 – which will be one of the few positive effects from the shrinking of the economy. The other positive effect will be the decrease of the current account deficit.

The most serious problem of Bulgaria is the sharp decrease of the foreign investment in the country which is expected to lead to a high unemployment exceeding 10%. It is expected that the unemployment will reach 12% in the next year.

The foreign investment will be 50% less than last year – from 16.7% to 7.5% of the GDP.

Bulgaria’s budget surplus reached 3.3 billion levs (1.5 billion Euros) in the end of May 2008, according to the Ministry of Finance. While 2.7 billion levs come from the budget, 590 million levs come from European funding. According to the current law the annual surplus should not exceed 3% of the GDP, i.e. 1.8 billion levs.

Recently, the 360 million USD from the Iraqi debt to Bulgaria have been paid but this amount will not be considered part of the surplus. The collection of V.A.T. goes as planned and so far, 38.9% or 3.1. billion levs have been collected,  while the one of direct tax is even better – about 50% of the planned amounts have been collected. The capital gain tax payment has increased by 30% in comparison to the last year with a surplus of 300 million levs. The income tax collected until the end of May 2008 is 800 million levs and it represents 37% of the planned receipts.