24.4.2007   

EN

Official Journal of the European Union

C 89/11

(1)

On 27 March 2007 the Council examined the convergence programme of Bulgaria, which covers the period 2006 to 2009.

(2)

(3)

The macroeconomic scenario underlying the programme envisages that real GDP growth will remain at a high level, slightly increasing from 5,9 % in 2006 to 6,1 % on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. However, high external imbalances continue to be a risk factor in the medium term, in particular as the external deficit in 2006 turned out at 16 % of GDP, although the financing of the deficit has been fully ensured through FDI inflows. The programme's projections for inflation appear realistic.

(4)

For 2006, the general government surplus is estimated at 3,3 % of GDP in the Commission services' autumn 2006 forecast, against a target of a balanced budget set in the December 2005 pre-accession economic programme (PEP) and a projected surplus of 3,2 % of GDP in the Convergence Programme. The substantially better budgetary outcome is mainly the result of higher than projected revenues due to conservative revenue forecasts in the PEP, higher output growth, and improved revenue collection. Compared to the PEP projections, expenditures are also lower by 1 % of GDP, reflecting mainly lower current expenditures.

(5)

(6)

(7)

The budgetary outcome in 2007 could be better than projected in the programme, while in 2008 and 2009 the risks to the budgetary projections appear broadly balanced. In view of the good track record with respect to the achievement of budgetary targets and provisions in the 2007 Budget Law for limiting expenditures during budget execution, a higher surplus for 2007 appears to be realistic even though revenue projections for 2007 could entail certain downside risks as revenue shortfalls from tax reductions may not be fully compensated by improved compliance and collection rates. Although no details are given on the adjustment strategy from 2008 onwards, the budgetary targets until the end of the programme period appear to be broadly plausible, provided that a better than currently projected budgetary outcome in 2007 is realised.

(8)

(9)

(10)

In the absence of the long-term projections of age-related expenditures, based on the common macroeconomic assumptions as carried out by the EPC/Commission, it is not possible to assess the impact of population ageing in Bulgaria on a comparable and robust basis as it is currently done for the other Member States, for which the projections on this basis are available. However, a significant impact of ageing on expenditures cannot be excluded given the current demographic structure. The initial budgetary position, with a large structural surplus, contributes significantly to stabilise debt before considering the long-term budgetary impact of ageing. Maintaining high primary surpluses over the medium term would contribute to containing risks to the sustainability of public finances.

(11)

The budgetary strategy in the programme is partly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. According to the programme, the fiscal policy stance is expansionary in 2007 which could turn out to be pro-cyclical in good times and risks aggravating the already high external deficit. In addition, while steps to improve the long-term sustainability of the pension system have been taken, very few concrete measures to improve the efficiency of public spending, in particular as regards healthcare expenditures, where there are recurrent problems with the monitoring and control of expenditures and the quality of the services provided, are presented.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (2).

(i)

achieve a higher budgetary surplus in 2007 than planned in the programme and to maintain a strong position thereafter in order to foster macroeconomic stability and to contain the high external deficit;

(ii)

to further strengthen the efficiency of public spending, in particular through a reform of the healthcare system.