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Balanced Budget Main Challenge for Bulgaria - Think-Tank

Date: 29.08.2009

Bulgaria faces the crisis in a much more stable position than most of the European economies and the United States, according to a report of the Bulgarian economic think-tank Industry Watch

Bulgaria's economy faces the main challenge of maintaining a balance of public finances in a state of shrinking public revenues and strong dependence on indirect taxes, according to a report of the Bulgarian economic think-tank Industry Watch.

The report, which studies the Bulgarian economy two years after the mature countries recognized the existence of a "global financial crisis", says one of its advantages is the low level of public debt and the low household indebtedness.

The risks of bank assets' quality deterioration could be neutralized by the relatively high levels of capital adequacy of banks and, if necessary, by the built fiscal buffers, the report says.

The onset of the financial crisis in 2007 coincided with a period of rapid economic growth in Bulgaria, driven primarily by investment activity.

Industry Watch experts say it is difficult to differentiate how much exactly the dynamics of the Bulgarian economy has been a a result of fundamental factors, related to increasing productivity and the improvement of the business environment, and how much - as a consequence only of the fast credit expansion.

According to the report there are at least a few indications that Bulgaria faces the crisis in a much more stable position than most of the European economies (and the US), while the factors of growth have not been only due to the access to "easy money".

Among these are years of policy of budget surpluses, currency board regime, which did not allow the BNB to stimulate and ease credit.

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