IMF Notes Bulgaria's Financial Stability Amid Political Turmoil, High Unemployment
Thursday, 01 January 1970
The International Monetary Fund (IMF) mission to Bulgaria said the country has maintained financial stability and growth potential despite the recent anti-government upheaval, but the jobless rate is disturbingly high.
Economic growth is expected to improve only slightly in 2013 from a subdued rate in 2012, backed by a rise in exports and absorption of EU funds, while inflation is seen to remain low, the IMF said in a press release after the completion of a regular visit to Sofia.
Nevertheless, uncertainties in the euro area and the political situation in the country pose certain risks. Bulgaria's gross domestic product (GDP) grew by 0.8% last year, but for this year IMF projected in April acceleration to 1.2%, it added.
Bond yields and credit-default swap spreads are in line with those of good performers in eastern Europe despite the unsettled political situation in the country and the global market turbulence in the last couple of weeks, IMF added.
The fund welcomed the government’s plans for increased social protection, fewer formalities for business, improved efficiency in the energy sector and anti-corruption measures, emphasizing their importance to support growth and employment. Bulgaria’s jobless rate stood at 11.2% in May, up by 0.2 percentage points in annual terms, but marking a slight decline for a third month in a row, according to data of the country’s Employment Agency.
"The 2013 budget deficit target is achievable," but possible deficiencies in revenues should not be offset by lower public spending as it will jeopardize "an already fragile recovery".
Bulgaria’s financial system was described as stable and well capitalized. Shannon commended “the authorities’ intention to maintain prudent, conservative financial sector policies in the context of changes in the European framework.”
The fund warned about the need of fiscal adjustment that would meet the public spending challenges caused by the aging population and continued emigration. “In this context, freezing the process of raising the retirement age and changes in indexation rules would imply deterioration in the sustainability of the pension system unless accompanied by compensating reductions in costs.”