February 22 (SeeNews) - The International Monetary Fund (IMF) said on Thursday that the main challenge the Bulgarian government faces is to translate economic recovery into sustained and inclusive growth and convergence with other EU countries.
Bulgaria’s per capita income is only half of the EU average and income inequality is higher than EU average, the IMF said in a statement upon the conclusion of Article IV annual consultations with the Bulgarian authorities.
According to IMF, Bulgaria's economy is expected to grow by 3.8% in 2018, driven by strong exports, easier financial conditions, and growing confidence. Over the medium term growth is projected to moderate to 2.75%, reflecting capacity constraints and unfavourable demographics.
"Public debt is low, but contingent liabilities and long-term fiscal pressures from demographic challenges could pose fiscal risks over the long run," it noted.
According to the fund, advancing governance reform and improving efficiency of public institutions at all levels remain key to raise potential growth and contain fiscal risks.
The banking system is resilient but bad loans remain well above the EU average and two of the banks identified by the asset quality review and stress test still require larger capital buffers, the IMF also said.
In 2016, following the completion of an asset quality review of the entire banking system, the central bank said that Fibank and the smaller Investbank need to build up their capital buffers.
The fund hailed the efforts to strengthen financial supervision and encouraged the authorities to address concentration and related party risks and to introduce a comprehensive strategy for bad loans reduction.
The IMF also said it approves of the government's plan for a balanced budget over the medium term, given the need for public investments.