May 30 (Bloomberg) -- The European Commission recommended lifting the excessive budget-deficit procedure against Bulgaria after the country narrowed its shortfall to within the European Union’s limit last year.
Bulgaria narrowed its budget gap to 2.1 percent of gross domestic product last year from 3.8 percent in 2010 and plans to cut the deficit to 1.36 percent this year. The commission, the EU’s executive, forecast this year’s shortfall at 1.9 percent, within the 3 percent EU limit.
The country has “sustainably corrected” its fiscal shortfall “in a durable manner,” EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels today.
Bulgaria, the EU’s poorest country in terms of economic output per capita where about 25 percent of bank assets are controlled by Greek lenders, weathered the global financial crisis without borrowing from international lenders. The government is working on cutting the deficit to raise funds for 835 million euros ($1 billion) of debt due in 2013.
Public debt was 16.5 percent of GDP at the end of last year, the second lowest among the EU’s 27 countries, the commission said this month. That will help compensate for contagion from Greece’s debt crisis, Tim Ash, an economist at Royal Bank of Scotland Group Plc in London, said in e-mailed note to clients today.
“Bulgaria has a stellar public-debt profile,” Ash said. “In a worst-case scenario, Bulgaria has the ammunition to cover potential problems in the banks, and also extending into public finance space, if growth dips, and budget revenues drop, boosting the fiscal deficit and budget financing needs.”
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