Bulgarian Cabinet Passes 2013 Budget, Imposes Interest Tax

Bulgaria’s Cabinet approved next year’s draft budget and imposed a 10 percent tax on interest from deposits to boost revenue and spending before elections.

The draft budget, which has yet to be debated and approved by Parliament, assumes economic growth of 1.2 percent under a pessimistic scenario and 1.9 percent under an optimistic one, Finance Minister Simeon Djankov told reporters in the capital Sofia today.

“The budget sets a sustainable macro-economic environment and encourages quicker economic recovery,” Djankov said. “It will provide the funds needed to deal with challenges in education, culture, infrastructure projects, environment protection and welfare.”

Bulgaria, the European Union’s poorest country in terms of economic output per capita, weathered the global crisis without borrowing from lenders abroad. Growth slowed to 0.5 percent from a year earlier in the second quarter, the same as in the first three months. The government works to cut the budget gap to help contain the fallout from the euro debt crisis.

Next year’s budget-deficit assumption is 1.3 percent of gross domestic product, unchanged from this year, he said. Next year’s revenue is estimated at 30.55 billion lev ($20.13 billion) or 37.5 percent of GDP, a 1.84 billion-lev increase from this year. Spending is projected at 31.65 billion lev or 38.8 percent of GDP, a 1.85 billion-lev increase from 2012.

Interest Tax

The government forecasts average EU-harmonized inflation at 3.4 percent next year, after 2.6 percent this year. The government set a public debt limit of 14.6 billion lev, or 17.8 percent of GDP, in 2013.

The Balkan country will impose in 2013 a 10 percent tax on interest from deposits for households, which will provide 120 million lev in revenue, Djankov said. The government plans to keep personal and corporate income taxes unchanged from a flat 10 percent next year, in an effort to attract more investment and boost growth, he said.

The interest tax “will not affect Bulgarian banks’ indicators and their stability,” the central bank in Sofia said in an e-mailed statement today. “Bank deposits have no alternative as the best form of savings” in Bulgaria, the bank said.

Bulgaria will raise pensions by 9.3 percent, minimal wages by about 7 percent and army salaries by 9 percent next year, Djankov said.

The International Monetary Fund raised this year’s economic growth forecast for Bulgaria on Oct. 2 to 1 percent from a 0.8 percent estimate on April 17, and to 1.5 percent for 2013 citing recovering exports.

The economy grew 1.7 percent last year, after a revised 0.4 percent in 2010. The European Commission forecasts the economy to expand 0.5 percent this year and 1.9 percent in 2013.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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