Bulgaria’s budget had accumulated a deficit of BGN 499.1 million as of January 31, according to the Finance Ministry’s latest report on the Consolidated Fiscal Program (the state budget plus EU funds). Public spending for January was BGN 2.17 billion, an increase of 31.7% year-on-year, while revenues dropped more than 33.4% year-on-year to BGN 1.75 billion.  



Analysis and Foreacast: Increasing Risk


The deficit for January is not a surprise. Many macroeconomists expected this negative trend because the first month of the year is traditionally not very good for state finances. A half-billion leva shortfall is not so problematic, especially considering BGN 195.4 million of the total stems from a deficit in European Funds.[1]  The problem is that the deficit had been growing while the government was loudly declaring unprecedented cuts in public spending, a reduction of state bureaucracy and a push to eliminate wasteful spending. The numbers reveal that GERB was actually increasing spending while revenues were declining. 


Almost all budget items registered an increase, belying the government’s promises of responsible fiscal stewardship. The administration increased salaries and remunerations 17.5% while boosting maintenance spending 12.3%. Social spending has risen almost 46%. Apparently GERB decided to loosen the budget rather than strengthen fiscal discipline. Perhaps the government wanted to compensate for the drop in private consumption or, more likely, to neutralize rising social discontent with short-term populist measures.


Source: Ministry of Finance, Institute for Market Economy


[1] EU funds – Pre-accession funds, Structural funds, Cohesion fund (managed by National fund) and also European Agriculture Fund for Rural Development and European Fisheries Fund (managed by Payment agency for common agriculture policy). Including national co-financing