Poverty and Social Protection in Bulgaria

IMF Working Papers, July 31, 2020

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Absolute poverty has dropped markedly in Bulgaria.
Income inequality has increased substantially in the aftermath of the GFC.
The increase in inequality is due to a rise in market income inequality compounded by a reduction in fiscal redistribution.
The redistributive role of direct taxation has declined with the introduction of a flat tax.
Social spending is relatively low and decreasing (as a share of GDP).
Social spending is concentrated on a few social risks and experienced a decline in its redistributive efficiency.
The COVID-19 crisis is likely to deepen income inequality, increasing the room for redistributive policies.

Rise in market income inequality.
Reduction in fiscal redistribution.
Policy change: introduction of a flat tax reducing the redistributive role of direct taxation.
Low and shrinking social spending, both in scale and redistributive impact.

The observed decline in fiscal redistribution and social spending suggests scope to enhance redistributive policies to mitigate rising inequality.
The COVID-19 crisis increases the urgency and room for redistributive policy responses to prevent further widening of income inequality.

Poverty and Social Protection in Bulgaria — Jean-Jacques Hallaert (IMF Working Paper No. 2020/147).