site.btaIMF Ends Regular Mission to Sofia as Experts Predict Double-digit Inflation in 2022

An International Monetary Fund (IMF) mission led by Jean-Francois Dauphin visited Sofia on April 5-15, 2022, for the 2022 Article IV consultation. The IMF projected 3 per cent economic growth and double-digit inflation for Bulgaria in 2022. The 2022 budget adopted in February would translate into a fiscal deficit of about 3 per cent of GDP on a cash basis, roughly equivalent to last year's deficit. According to the IMF, this policy stance strikes a reasonable balance between supporting the recovery in face of headwinds from the war in Ukraine and not fuelling inflation pressures further. The planned mid-year budget revision will need to be approached flexibly, as new needs and priorities may emerge, and risks may materialize. These may warrant reprioritization and, possibly, a looser fiscal stance than currently planned, which the low public debt level would provide the space for. The IMF experts recommended a review of the composition of spending and made specific suggestions. 

Speaking at news conference at the end of the visit on Friday, Dauphin said that in an uncertain environment, economic policies need to deal with significant challenges. While the recovery from the pandemic-induced crisis was getting hold, the war in Ukraine is expected to have a significant economic impact, including by slowing growth and increasing inflation. Fiscal policy needs to continue providing adequate health and economic support, respond to demands arising from the war, and plan for the unknown, while avoiding adding to inflationary pressures. The banking sector is well capitalized but, in a challenging environment, financial sector policies need to remain vigilant. At the same time, policies need to tackle long-standing structural challenges, especially raising living standards, reducing inequalities, and supporting the green transition. With the euro area accession in sight, policies that help foster income convergence with EU partners are even more important. The Resilience and Recovery Plan, supported by EU funds, has a crucial role to play in these areas. The authorities' focus on improving governance and fighting corruption is welcome. 

The full text of the concluding statement of the IMF mission in English can be accessed here.