site.btaFinance Ministry Sets 6.6% Deficit, New Debt of Nearly BGN 16 Bln in Draft Budget for Next Year

The Ministry of Finance expects the Gross Domestic Product (GDP) for 2023 to be BGN 173.826 billion - a growth of 1.6%, unemployment to be 4.6 to 6.4%, caretaker Finance Minister Rositsa Velkova told journalists on Thursday as she presented the draft budget for next year.

Revenues in the Consolidated Fiscal Programme (CFP) are expected to grow by BGN 5.9 billion. A reduced rate on bread, fuel and other goods is included in the draft budget, as well as tax relief for children and a reduction in the VAT registration rate.

Expenditure in the CFP grows in 2023 by BGN 11 billion, meaning the deficit will be 6.6% of the projected GDP. Of this, BGN 1.9 billion are increased personnel costs; 3.7 billion is for pensions increase, as of July 1 this year. In capital expenditure, there is an increase of BGN 3.1 billion. The money for indexation in the construction sector has increased by BGN 400 million. The money for defence is 1.85% of GDP.

At this deficit level, a new debt of BGN 15.9 billion should be drawn in 2023, which would bring the size of the public debt to BGN 50.3 billion and the debt-to-GDP ratio to 28.9%. Borrowing will continue in the coming years and by the end of 2025 will be over 38% of GDP, and it is a serious challenge for a small and open economy to raise debt financing, Minister Velkova said.

The interest costs for debt servicing are starting to increase, being around BGN 600 million for 2022, reaching BGN 832 million for 2023, BGN 1.720 billion for 2024 and over BGN 2.6 billion for 2025.