In a report released on June 23 2009, the European Commission (EC) revised to negative its outlook for the Bulgarian economy published in April and now expects public finance to wade in the red this year and the next.
 
It the Government sticks to the current course of action, the budget deficit will swell to 0.5 per cent of gross domestic product (GDP) for 2009 and 0.3 per cent for 2010 from a 1.5 per cent surplus seen in the previous projection.
 
In a comprehensive report on public finance in the 27 EU nations, the EC warned that while national budgets had emerged as a key weapon in the battle against the economic meltdown, they should be managed wisely and in a way that increased spending does not place an unbearable burden on taxpayers.
 
The report estimated that Bulgaria’s budget surplus was 1.5 per cent of GDP for 2008, falling twice short of the target in the Budget adopted a year before, mainly due to depressed revenue but also slack control over Government spending.
 
The heaviest blow came in the final quarter of the year, when the sharp economic deterioration squeezed tax and social security receipts, while the new 10per cent flat tax rate brought in less revenue. Moreover, even after the blocked and suspended European funding opened a wider gap, the Government raised pensions and public salaries by a higher-than-planned margin.
 
The sorry shape of the economy leaves the Cabinet little room for fiscal maneuver. With no more stimulus measures mapped out in this year’s budget, Bulgaria should further rein in expenditure if it is to balance off finances, the EC report said.
 
The EC expects Bulgaria’s national debt will balloon as a GDP ratio in both 2009 and 2010.
 
The report came as global agency Standard & Poor’s told Reuters that Eastern Europe faces an axe on credit ratings and economic outlooks, a mountain of private and national debt and growing insecurity.
 
Source: Dnevnik.bg