June 28 (SeeNews) - Bulgaria's 2023 draft budget projects a deficit equivalent to 3.0% of the planned gross domestic product (GDP), in line with the EU requirements for eurozone accession, while guaranteeing social expenditure and maintaining existing taxation levels, finance minister Assen Vassilev said on Wednesday.
The deficit on a cash basis is forecast at 2.5%, with the difference taking into account the impending second tranche of EU grants under Bulgaria's National Recovery and Resilience Plan (NRRP), Assen Vassilev said, as seen in a video published by public TV BNT.
In 2022, Bulgaria posted a budget gap of 2.9% of GDP.
Bulgaria's GDP is expected to expand by 1.8% this year, reaching 184.5 billion levs ($103.4 billion/94.3 billion euro), the finance ministry said in an earlier press release. The GDP growth is then seen to accelerate to 3.3% in 2024, before easing slightly to 3.2% in 2025.
As a result of delays in the adoption of targets and measures that Bulgaria must fulfil to receive further tranches under the NRRP, the finance ministry expects the second installment, in the amount of 1.42 billion levs, to be disbursed at the end of 2023. A total of 66 targets and milestones must be fulfilled by end-September so as to guarantee the payment of that installment. The third tranche is expected to be delayed to 2024, according to the ministry. Bulgaria has to date received one tranche of the approved EU financing of 5.69 billion euro under the NRRP.
Next year, Bulgaria's budget deficit is projected at 3.0% of the planned GDP, before increasing to 3.6% in 2025 as a result of the expenditure for the acquisition of new F-16 fighter aircraft. Without the one-off effect of that acquisition, the 2025 deficit is projected at 2.8%.
Bulgaria's average annual inflation is projected at 8.7% in 2023. It is expected to abate to 3.8% in 2024 and to further slow down to 2.8% in 2025. The downward trend in inflation is mostly due to the ongoing decline in the prices of tradables, such as energy and food, with energy prices in particular seen to continue to decline until 2025, the ministry said.
Bulgaria's average annual inflation stood at 15.3% in 2022.
The country's inflation is at present 5.45% above the ceiling determined by the Maastricht criteria for eurozone membership, Bulgarian National Bank deputy governor Kalin Nikolov said at the Sofia Economic Forum on Tuesday.
Earlier this year, the former caretaker government set a new target for Bulgaria's eurozone accession of January 1, 2025, delaying the adoption of the euro by a year, in part due to the inability to keep inflation within the limits prescribed by the EU.
The draft budget reflects the increase of the minimum monthly wage to 780 levs from 710 levs, as of January 1. Pension expenditure for 2023 will increase to some 3.66 billion levs, assuming an increase of 12% on the year in line with existing legislation.
The finance ministry also proposed defence expenditure of 1.88% of this year's planned GDP, rising to 2% of GDP in 2024.
Government debt is forecast to be capped at 40.6 billion levs at end-2023, or 22.0% of the estimated GDP, up from 21.8% at the end of last year. In the ministry's medium-term forecast, government debt is expected to rise to 28.3% of GDP by end-2025.
(1 euro = 1.95583 levs)