April 5 (SeeNews) - Bulgaria needs to implement policy reforms to speed up its economic growth, accelerate convergence to the Organisation for Economic Co-operation and Development's (OECD) income levels and address disruptions from the global energy crisis caused by the war in Ukraine, the OECD said.
The country's inflation has hit 1990s levels due to high global energy and food prices, complicating its adoption of the euro, the OECD said in a statement on Tuesday, following the launch of its economic assessment of Bulgaria. In September 2022, harmonised consumer price inflation peaked at 15.6%, but is predicted to drop to 8.2% in 2023 and 4.4% in 2024. To tackle the issue, Bulgaria should tighten its fiscal policy, improve the tax system and reduce labour informality.
The OECD expects Bulgaria's gross domestic product (GDP) growth to slow to 1.9% in 2023 and then accelerate to 3.2% in 2024. Last year, the country's GDP went up by a real 3.4%, according to the latest preliminary data published by the National Statistical Institute (NSI).
"Growth is also constrained by weak investment. While public investment, at 3.4% of GDP, is in line with the OECD average, Bulgaria’s overall level of investment is relatively low at 20% of GDP. Streamlining procedures to establish and close a business would help to attract private capital. So would intensifying efforts to fight corruption, for example through more rigorous systems of detection and investigation," the OECD noted.
At the same time, the country needs to enhance tax efficiency and compliance and raise environmental, property and inheritance taxes in order to increase government revenues.
“Bulgaria has achieved two decades of solid economic progress, with per-capita income rising from 30% of the OECD average in 2000 to over 50% today,” OECD Secretary-General Mathias Cormann said.
Enhancing the quality of education, adult skills and jobs, along with ensuring better immigration support and childcare could help address the country's shrinking and ageing workforce. Additionally, Bulgaria should prioritise reducing the high level of labour informality, digitalising transactions and increasing incentives to declare wages, while also overhauling the welfare system to improve social support.
Finally, the OECD called on Bulgaria to develop a far-reaching strategy to reach net-zero emissions, invest in renewables, upgrade the power grid and expand energy storage facilities.
Bulgaria is in the process of accession to the OECD, which aims to facilitate convergence with OECD standards and income levels, as well as best practices in government policy.