Bulgaria Oks Mid-Term Fiscal Plan, Economy to Shrink by 2% 2010

Finance | August 26, 2009, Wednesday // 15:51|  views

Bulgaria's Finance Minister Simeon Djankov (L) is pictured here together with Prime Minister Boyko Borisov after Wednesday's regular governmental meeting. Photo by BGNES

Bulgaria's center-right government approved on Wednesday a mid-term fiscal policy document, which brings together the country's key macroeconomic forecasts for 2010-2013.

The document forecasts the contraction of Bulgaria's economy to slow down to 2% next year from a 6.3% shrinking in 2009.

The government plans to keep the current tax rates unchanged and cut social security payments by 2% from current 31.6%.

The government approved the proposal of Finance Minister Simeon Djankov to freeze public salaries and pensions until the middle of June, arguing the people's purchasing power will stay unchanged due to the easing of inflation, which is expected to fall to 1.8% at year-end.

The proposal drew harsh opposition from the social affairs minister, according to whom freezing the minimum wage at BGN 240 will fuel the grey sector and lead to a decrease in incomes.

Next year's unemployment rate has been set at 11,4%.

The GERB party, which won the July election, decided earlier this month to cut public spending by an additional BGN 1,156 B and improve tax collection to avoid slumping into a budget deficit at the end of the year.

The ruling party has given indication that it is likely to turn the IMF for help, something the previous government has resisted and most economists would applaud.

A final decision is expected to be taken in February, when the budget parameters and the impact of the public spending cuts the party plans to undertake will be clear. 

 

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Tags: Simeon Djankov, minority government, budget, elections 2009, euro zone, exchange-rate mechanism

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