Bulgaria will revise up its economic growth forecast for this year as recovering exports bolster the expansion, Finance Minister Simeon Djankov said.
“The economic outlook is more optimistic now than it was at the end of 2009,” Djankov said today in an interview in Madrid. “We are likely to upgrade our economic forecasts in the next few days to something like 1 percent.”
Prime Minister Boiko Borissov’s government previously estimated the economy would grow 0.3 percent after a contraction of 5.1 percent in 2009 on dwindling investment and consumption.
The economies of eastern Europe, which grew at a faster pace than their western peers earlier this decade, are recovering from their deepest recession since switching to free- market policies 20 years ago. Fiscal deficits, exacerbated by state spending to help revive economic growth, rose last year to 6.5 percent of gross domestic product from 3.3 percent the previous year, the World Bank said on April 1.
“Unemployment is stabilizing, slowly falling, which is a positive development, and the mortgage market has been rising for a third consecutive month,” Djankov said. “These are all small positive signals.” Unemployment eased to 10.1 percent in March from 10.3 percent in April.
Bulgaria may start its application process for the European Union’s exchange-rate mechanism ‘within months,” depending on whether EU authorities put the country under their scrutiny for an “excessive deficit” after the government this month revised up its budget shortfall for last year, Djankov said.
Should the EU sanction the government for last year’s hidden budget gap, the Balkan country would apply for the pre-euro currency stability test “early next year,” Djankov said. Borissov’s government took over from the Socialists after elections in July 2009 and on April 9 uncovered a budget deficit of 3.7 percent of GDP for last year.
The European Commission will say that Bulgaria’s steps to rein in the shortfall are “adequate,” in their assessment of the country’s latest convergence plan, Djankov said.
The deficit this year may be 1.8 percent of GDP, Djankov said. Bulgaria’s budget deficit expanded to the widest in at least a decade in February as tax revenue fell because of declining imports. The shortfall more than doubled to 1.398 billion lev ($964 million) from 500 million lev in January.
On April 1, parliament approved 60 steps to raise 1.6 billion lev and narrow the widening deficit by the end of the year. The steps include the sale of minority stakes in companies and of greenhouse emission credits, cutting administration costs and raising taxes on gambling and insurance premiums.
The EU’s expansion to 27 nations since May 2004 requires new members to adopt the common currency after fulfilling criteria on debt, budget deficits, currency stability, interest rate convergence and inflation. Slovakia and Slovenia have already made the currency switch, while Estonia hopes to follow their lead next year.