Bulgarian Finance Minister Plamen Oresharski said that the country’s growing current account (CA) deficit was a signal to tighten fiscal discipline.

Oresharski was speaking at a conference in Sofia on October 3 entitled Second Decade of Growth: Risks and Opportunities, organised by Bulgarian newspaper Kapital and German newspaper Handelsblatt.

He said that the primary fiscal precondition to achieve increased competitiveness in Bulgaria was to sustain a budget surplus for at least three to four years. Other preconditions included maintaining the fixed exchange rate between the lev and the euro, dealing with any problems for the export industry and a small foreign debt.

Bulgaria's foreign debt had gone down from 133 per cent of GDP in 1997 to less than 20 per cent in 2007. Oresharski said that this was a record decrease worldwide and had allowed a reduction of the vulnerability of the economy and had a beneficial impact on demographics and
competitiveness.

Factors deterring an increased competitiveness were inflation together with the high CA gap, which is at a record 18 per cent of GDP.

One of the stimuli introduced by the Government was a corporate tax rate of 10 per cent as of January 1 2008, part of a strategy to aggressively lower direct taxes at the expense of indirect taxes, Oresharski said.

Public expenditures would be down to 40 per cent of GDP, but should not drop below that, he added. Lower public spending would result in lower salaries for the public administration, resulting in turn in a lower quality of public services.

Bulgaria should not expect to quickly converge on macro-economic parameters of the so-called old Europe, he said.
An example was the rate of productivity growth, which currently was comparable to that in old Europe, leaving no room for Bulgaria to catch up, Oresharski said.