SOFIA (Bulgaria), February 22 (SeeNews) – The European Commission said on Wednesday Bulgaria needs to make further progress in addressing vulnerabilities in the financial sector as well as high corporate indebtedness in order to resolve the excessive macroeconomic imbalances the country is experiencing.
“Reducing the high level corporate indebtedness has been constrained by the delayed adoption of the insolvency reforms and the lack of a deep market for sales of corporate non-performing loans,” the Commission said in its European Semester Winter review.
Legislative changes aimed at improving the insolvency framework have only recently been adopted. Implementation challenges, including the qualification and training of judges and the capacity of courts remain to be addressed, the Commission added.
Bulgaria is one of six EU member states with excessive macroeconomic imbalances. The other five are Croatia, France, Italy, Portugal and Cyprus.
According to the review, limited progress has been achieved regarding follow-up actions in the financial sector and improving banking and non-banking supervision. Key challenges for the Bulgarian authorities remain tackling hard-to-value assets and unsound business practices, including related-party and connected lending.
Bulgaria’s banking sector has stabilised, but the legacy issues linked to weak governance and supervision have not yet been fully dealt with, the Commission added.
The perception of corruption, weak institutions and an unstable legal framework remains a cause of concern regarding business environment. In addition, slow administrative reforms and weaknesses in public procurement continue to affect the efficiency of the public sector.
Among the other key challenges for Bulgaria, the Commission outlines the need of enhancing the efforts to tackle the shadow economy.
While Bulgaria’s unemployment rate remains well below the EU average, high long-term unemployment, high inactivity levels, and limited inclusion of young people present key impediments to the functioning of the labour market.