{ "title": "Bulgaria: Staff Concluding Statement of the 2020 Article IV Mission", "publication": "IMF News, February 14, 2020", "sourceUrl": "https://www.imf.org/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement", "canonical": "https://www.imf.org/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement", "overlayPath": "/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/index.md", "summary": "An International Monetary Fund (IMF) mission, led by Mr. Jaewoo Lee, visited Sofia during February 4-14 to conduct the 2020 Article IV consultation.", "publishDate": "2020-02-14", "sections": [ { "heading": "Mission visit and purpose", "content": "- An International Monetary Fund (IMF) mission, led by Mr. Jaewoo Lee, visited Sofia during February 4-14 to conduct the 2020 Article IV consultation.\n- Publication date: February 14, 2020." }, { "heading": "Macroeconomic assessment and outlook", "content": "- Bulgaria’s economic policy challenge: reinvigorate inclusive growth and sustained income convergence.\n- Recent performance:\n - Bulgaria’s economy had robust growth in 2019 and unemployment fell to a record low.\n - The fiscal position is strong.\n - The external position remains strong, with the current account recording a large surplus.\n- Fiscal outlook:\n - The fiscal account is projected to move back from a one-off deficit in 2019 to balance this year and over the medium term.\n - If downside external risks materialize, automatic fiscal stabilizers should be allowed to play freely and public spending that supports investment could be raised.\n- Risks and medium-term challenge:\n - Another robust economic performance is widely expected for 2020, albeit with softer growth and subject to downside external risks.\n - The distance to high incomes elsewhere in the EU remains large; income inequality is high; demographic headwinds exist.\n - Achieving more inclusive growth and faster income convergence requires structural reforms to improve governance, loosen labor shortages, strengthen education, and alleviate inequality." }, { "heading": "Improving public services and governance", "content": "- Fiscal space and objectives:\n - Bulgaria’s strong fiscal and external positions provide room to increase the level of fiscal spending.\n - There is scope for greater revenue mobilization to maintain a balanced budget over the medium term, which is an appropriate objective.\n - Small deficits that serve to support growth-enhancing spending measures would also be appropriate, provided public debt remains around its present low level.\n- Public investment and EU funds:\n - Improving public investment management would increase investment efficiency and set the stage for increasing the level of public investment.\n - The forthcoming nation-wide application of the e-procurement system is welcomed.\n - Encourage developing standard guidelines for project appraisal and improving multi-year budgeting.\n - The absorption rate of the EU funds has improved over that of the previous cycle; better planning for future EU funds would reduce backloading and support more efficient investment.\n- Revenue administration and tax policy:\n - More effective revenue collection would increase usable resources and improve public sector efficiency and transparency.\n - Options include reducing the sizable VAT compliance gap and increasing the property tax.\n - A diagnostic based on the IMF’s framework, Tax Administration and Diagnostic Assessment Tool, could help assess administrative capacity and identify improvements.\n- Governance and SOEs:\n - Progress expected in strengthening the judiciary and implementing the framework for state-owned enterprise (SOE) governance.\n - Government plans to operationalize a post-monitoring council following favorable recognition in the European Commission’s Cooperation and Verification Mechanism.\n - Legislation on SOE governance has been aligned with the OECD guidelines (a commitment for ERM II); strong implementation should follow, including for ownership policy, financial oversight and board qualification." }, { "heading": "Investing in people", "content": "- Social protection and inequality:\n - Bulgaria’s inequality is already high and has been rising; social protection spending (as a share of GDP) and the effectiveness of fiscal redistribution have been falling.\n - Recommendation: review the level, targeting, and composition of social protection spending, and consider increasing such spending to better cover broader social risks.\n - Without necessarily revisiting the social contract around the flat income tax, the redistributive role of taxation could be increased, for example, by increasing the maximum insurable income.\n- Labor market policies:\n - Endorses ongoing policies to reduce labor shortages (worker importation agreements, efforts to bring back overseas Bulgarians, training programs).\n - Recommendation: strengthen active labor market policies (ALMPs); spending on ALMPs is low relative to other EU countries.\n - Suggested ALMP priorities: training, start-up incentives, and private sector employment programs to reduce long-term unemployment (LTU) and improve job matching efficiency.\n- Education and human capital:\n - There is room to increase public spending on education, which remains low among EU countries, while ensuring efficiency.\n - Higher spending could support teaching of digital skills, modernization of the education system, assistance for NEET and early school leavers, promoting equal access to quality education, and raising teacher salaries.\n - Greater involvement of business could align university curricula with labor market needs; teacher wage hikes should be complemented by measures to attract and retain high-performance teachers." }, { "heading": "Strengthening the financial sector", "content": "- Supervision and buffers:\n - The Bulgarian National Bank (BNB) continues a conservative approach to financial supervision with emphasis on capital buffers.\n - BNB has been raising the countercyclical capital buffer gradually.\n - More narrowly targeted macro-prudential measures (e.g., borrower-based ones) could be deployed if excessive growth risks emerge in certain credit segments.\n- Non-performing loans (NPLs) and insolvency:\n - NPL reduction slowed in 2019 after rapid declines since 2015; the NPL ratio remains well above the EU average.\n - The mission encourages renewed efforts to reduce NPLs; welcomes BNB’s adoption of the European Banking Authority’s NPL guidelines.\n - Reforms to improve the insolvency framework (another ERM II commitment) could help reduce NPLs.\n- Joining the European banking union:\n - Joining the banking union awaits the satisfactory recapitalization of two banks identified under the ECB’s comprehensive review, a pending requirement.\n - Upon joining the banking union (as a non-euro area country), significant institutions will fall under direct ECB supervision, as Bulgaria joins both the Single Supervisory Mechanism and Single Resolution Mechanism.\n - Preparations for ERM II and the banking union have included strengthening the anti-money laundering framework and supervision of the non-bank financial sector." }, { "heading": "Potential gains from successful reforms", "content": "- Successful reforms could bring appreciable efficiency gains and catalyze higher investment.\n- Higher, more efficient investment is necessary for sustaining faster growth and convergence and would help moderate Bulgaria’s current account surplus.\n- More and better spending on government services could also moderate savings and the current account surplus." }, { "heading": "Closing", "content": "- The mission thanks the authorities and other counterparts for the constructive dialogue and kind hospitality.\n\nSource: Bulgaria: Staff Concluding Statement of the 2020 Article IV Mission (February 14, 2020).\n\n---\n\n\n References\n\n- Bulgaria and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement" } ], "bullets": [ "[Markdown version](/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/index.md)", "[Structured JSON version](/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/index.json)", "[Bundle manifest](/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/bundle-manifest.json)", "Published: February 14, 2020", "An International Monetary Fund (IMF) mission, led by Mr. Jaewoo Lee, visited Sofia during February 4-14 to conduct the 2020 Article IV consultation.", "Publication date: February 14, 2020.", "Bulgaria’s economic policy challenge: reinvigorate inclusive growth and sustained income convergence.", "Recent performance:", "Fiscal outlook:", "Risks and medium-term challenge:", "Fiscal space and objectives:", "Public investment and EU funds:", "Revenue administration and tax policy:", "Governance and SOEs:", "Social protection and inequality:", "Labor market policies:", "Education and human capital:", "Supervision and buffers:", "Non-performing loans (NPLs) and insolvency:", "Joining the European banking union:", "Successful reforms could bring appreciable efficiency gains and catalyze higher investment.", "Higher, more efficient investment is necessary for sustaining faster growth and convergence and would help moderate Bulgaria’s current account surplus.", "More and better spending on government services could also moderate savings and the current account surplus.", "The mission thanks the authorities and other counterparts for the constructive dialogue and kind hospitality.", "[Bulgaria and the IMF](http://www.imf.org/external/country/BGR/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/index.md", "json": "/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/index.json", "bundleManifest": "/en/news/articles/2020/02/14/mcs021420-bulgaria-staff-concluding-statement/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T23:27:03.499Z" }