Rumen Porozhanov: Revised 2014 Budget Gap Seen at 2.6%-2.8%

Bulgaria’s caretaker government plans to propose to parliament that will be formed after October 5 snap vote to raise this year’s budget deficit to just below 3% of GDP.

In an interview with Sofia-based Standart daily caretaker Finance Minister Rumen Porozhanov said that the cabinet's “estimates point to cash deficit of 2.6% to 2.8%”.

By the end of the month the cabinet will make an estimate on the effect of the steps it has taken to increase customs revenue, where the largest gap in revenue is yawning, and mitigate the negative impact of the halt in EU funding under Operational Programmes Environment and Regional development, Porozhanov said.

“Estimated budget revenue collection is BGN 900 M short of target” mainly due to unrealistically high projections in the 2014 budget bill adopted by the previous government at the end of 2013.

Unrealistically high rise of 11% in budget revenue compared to 2013 has been projected for this year, “which cannot take place when economic growth target is set at 1.8%,” Porozhanov said, adding that while inflation and higher economic growth were projected for 2014, “currently we have deflation which has impacted budget revenue”.

The caretaker cabinet, which took office a month ago with the main task of preparing early elections in October, expects Bulgaria’s economy to grow by 1.5%-1.6% in 2014 with full-year deflation seen at 0.2%-0.3%, the finance minister said.

“Of course, there are many reasons for this deflation: external, such as the fall in international prices of basic goods, and domestic, such as maintaining artificially low energy prices and a slowdown in economic activity,” Porozhanov explained.

Looking ahead, he said the caretaker cabinet has not discussed proposing any tax hikes to take effect from next year.

“Any decision to raise tax and [pension and health] insurance rates is to be taken by the new government that will be formed after the elections,” said Porozhanov.

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