MINISTRY OF FINANCE
ENSURING
STABILITY AND
GROWTH
PLAMEN ORESHARSKI
MINISTER OF FINANCE
12 December 2007
Sofia
GROWTH ESTIMATES
20,00%
Final consumption
Net export
HICP
Investment
Real GDP growth
15,00%
10,00%
5,00%
0,00%
-5,00%
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
-10,00%
The key medium-term priority of the Government is to maintain
macroeconomic stability and high economic growth rates.
2
TAX RATES AND BUDGET REVENUE:
CORPORATION TAX
Source: MoF
*estimate
 Increasing corporation
tax revenue despite the
lower rate
3,5
3
20
2,5
15
%
2
%
 Expanding the tax base
in 2007 – positive net
effect of the lowered tax
rate
25
1,5
10
1
5
0,5
0
0
2002
2003
2004
Tax revenue (% of GDP)
4
2005
2006
2007*
Tax rate (%)
TAX RATES AND BUDGET REVENUE:
PERSONAL INCOME TAX
Source: MoF
*estimate
 Introduction of flat tax rate
of 10% in 2008
PIT revenue (% of GDP)
4
 Removal of the personal
allowance
3,5
3
2,5
%
 Expected positive effect as
a result of stimulating the
economic activity of the
population and encouraging
the highly qualified labour
2
1,5
1
0,5
0
2002
5
**plan
2003
2004
2005
2006
2007*
2008**
EXPENDITURE POLICY PRIORITIES
Source: MoF
 Investment policy supported by
EU Funds – focused on
transport infrastructure and
environment
 Education and healthcare
remain key priorities of the
budget
 Focus on certain social activities
– rising child allowances and
benefits
6
Share in total expenditure
%
18
16
14
12
10
8
6
4
2
0
2008
Economic activities, incl. transport
2010
Environment
MONETARY STABILITY
4
3
2
1
1.
1.
07
7.
1.
07
0
1.
1.
06
7.
1.
06
 Measures to curb the credit
activity of commercial banks
(as at 1 September 2007)
5
1.
1.
05
7.
1.
05
 FX reserve – covers more
than 180% of the monetary
base and 5-6-month imports
6
1.
1.
04
7.
1.
04
 Maintaining sufficiently high
fiscal reserve levels –
outcome of the positive
budget balance policy
Source: BNB, AEAF
7
FX reserve (in months of imports)
FX resrve minus fiscal reserve (months of
imports)
7
CURRENT ACCOUNT DEFICIT
Balance "Savings - Investment"
% of GDP
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
-5
-5
-10
-10
-15
-15
-20
-20
2000
2001
2002
Current account deficit
2003
2004
Investment
2005
2006
Savings
Source: NSI, BNB
БНБ
In terms of the balance between savings and investment the current
account deficit is mainly due to higher domestic investment and
less - to lower national savings
8
CURRENT ACCOUNT DEFICIT:
FACTORS
9
Fundamental:
Temporary:
 EU membership
 High return on domestic
investment
 Considerable FDI growth
 Increasing domestic
demand, in particular
investment
 Positive expectations for
future income
 Liberalization of trade in
garments in 2005
 The floods in 2005 and
the drought in 2007
 Slow down of production
as a result of
restructuring certain
sectors
CURRENT ACCOUNT:
SUSTAINABILITY INDICATORS
 Macroeconomic stability
 High economic growth
 Strong investment activity
 Increasing foreign trade openness
 High degree of capital openness
 Sound financial system
 Favourable structure of external debt
 FX reserve, covering the 6-month import of good and
services
Key challenges facing the policy:
 Business environment and labour market flexibility
 Diversification of international trade
10
EURO ADOPTION
 Bulgaria will maintain the stability of the Currency Board
Arrangement, while keeping the current exchange rate
(BGN 1.95583/EUR 1), until joining the Euro area.
 The Government and the Central Bank have already
formulated and are in the process of taking the relevant
measures to include the Bulgarian currency in ERM II.
11
READINESS
FOR EU FUNDS ABSORPTION
 The implementation of the National Strategic Reference
Framework and the Operational Programs whereby it is
implemented has been launched
 The European Commission officially approved NSRF on
22 June 2007
 All OPs have been officially approved as of the
beginning of November 2007
 Pending approval of the Rural Development Program and
OP Fisheries and Aquaculture
 Institutional and administrative capacity
 Audit and internal control systems; transparency of EU funds
management
12
MINISTRY OF FINANCE
THANK YOU!
PLAMEN ORESHARSKI
MINISTER OF FINANCE