site.btaFinance Minister: We Have Drawn Up Tentative Medium-Term Forecast for 2023-2025

The Finance Ministry has drawn up a tentative macroeconomic forecast for 2023-2025, which will be updated in September, Finance Minister Rossitsa Velkova told a news conference on Monday. Based on that, the Ministry has also prepared a working version of a three-year state budget forecast. According to the latter document, in 2023 GDP will be BGN 166.667 billion and its growth will slow to 2.2%, and average annual inflation will decelerate to 5.6%.

The state budget deficit in 2023 is expected to amount to BGN 11.4 billion, accounting for 6.8% of GDP.

Velkova explained: "The caretaker government will have to cover many unforeseen expenditures by restructuring central budget spending. One such item of expenditure is over BGN 70 million for the elections. Also, funding is being sought for the accommodation of refugees from Ukraine."

According to Velkova, another revision of the state budget is impossible right now, because the revenue side is under much strain, and the National Revenue Agency and the Customs Agency would have a hard time collecting the revenues planned in the latest budget revision in June.

The above-mentioned projections for the state budget deficit in 2023 (amount: BGN 11.4 billion; deficit-to-GDP ratio: 6.8%) are founded on a basic scenario for the three-year budget forecast, which reflects only the current policies on both the revenue side and the expenditure side. Debt financing would amount to BGN 15 billion. If the deficit level is maintained, by 2025 the government debt will be 40% of GDP, Velkova said.

She expects expenditures to grow along several lines in 2023: social and health insurance payments growing by more than BGN 5 billion, pensions BGN 3.8 billion, staff costs BGN 1.6 billion, and capital expenditures BGN 3.8 billion (the year will see the start of investment expenditures under the Recovery and Resilience Facility). These expenditures cannot ensure the flexibility needed for streamlining and restructuring. "Unless a tax policy shift is made and expenditures are restructured, we will very easily get to a super-deficit procedure and deviate from the path to Eurozone membership, which is planned for January 1, 2024," the Minister warned.