Statement by IMF First Deputy Managing Director John Lipsky at the Conclusion of his Visit to BulgariaPress Release No. 07/123
June 7, 2007
Mr. John Lipsky, First Deputy Managing Director of the International Monetary Fund (IMF), made the following statement today in Sofia:
"This is my first visit to Bulgaria and I am grateful for the opportunity to visit your country. I have had the privilege of meeting Prime Minister Stanishev, Minister of Finance Oresharski, Governor of the Bulgarian National Bank Iskrov, and other officials. I have also had the opportunity to meet with members of the national assembly, and representatives of the business sector and labor unions. I would like to thank everyone for the hospitality extended during my visit and for the constructive discussions.
"Bulgaria's economic performance during the past decade was good—stable and solid growth, rising employment and moderate inflation—and this is largely due to a prudent fiscal policy and steady and meaningful structural reforms, in the context of the currency board arrangement. The Bulgarian authorities are to be commended for the successful completion of the most recent Stand-By Arrangement with the Fund.
"The macroeconomic outlook remains promising, with GDP growth likely to hover around 6 percent during 2007-08 and inflation to decelerate. At the same time, the large current account deficit, projected to increase further this year, poses risks. While the widening of the deficit reflects confidence in Bulgaria's future, it also implies an increase in the country's vulnerability to external shocks. I urge the government to maintain the prudent stance of fiscal policy that has served the country well. Indeed, the presently benign international economic environment is an ideal context in which to continue fiscal consolidation, to further build up liquidity buffers that could be drawn on in the event of financial market turbulence, and to prepare for the eventual fiscal burdens that will be posed by the aging of Bulgaria's population.
"Financial intermediation has increased substantially in recent years, a visible sign of recovery from the financial collapse a decade earlier. At the same time, rapid credit growth can be accompanied by increased risks, and strong supervision is needed to protect the soundness of the banking system. In this regard, I commend the authorities for maintaining a tight prudential framework.
"Maintaining competitiveness and accelerating the improvement of living standards requires deeper and more far-reaching reforms to improve the business climate, increase competition, and enhance the flexibility of labor markets.
"We at the IMF look forward to remaining engaged with Bulgaria, providing analysis of economic and financial developments accompanied by policy advice on macroeconomic and important structural issues, and technical assistance in the areas of Fund expertise."