Bulgaria's Cabinet has approved its budget forecast for 2012-2014 which stipulates a gradual reduction of the budget deficit while ruling out tax increases.
According to the Finance Ministry, budget forecast, which was adopted by the government together with a strategy for the management of the public debt, lays out the fiscal goals for by accounting for the macroeconomic challenges before Bulgaria and the planned reforms.
It points out that the 2012-2014 forecast provides for a fiscal policy resting on low taxes, a limited redistribution role of the state, and the requirements of the EU Stability and Growth Pact.
Thus, the governments plans to lower Bulgaria's budget deficit to 1.5% of the GDP in 2012, 1% in 2013, and 0.5% in 2014. The 2011 budget deficit is projected at 2.5%, while the 2010 deficit was 2.75%.
The reduction of the budget deficit in the three-year period is supposed to be achieved while keeping the taxes at their present level, which is the lowest in the EU with flat 10% corporate and income tax rates, a gradual increase in the excise duties in order to reach the minimum EU levels, and increasing tax collectibility.
The Cabinet has also set a goal to limit the redistribution role of the state in the national economy to no more than 40% of the GDP, including Bulgaria's contribution to the common EU budget and the national co-financing for EU-funded projects.
The government further expects that in 2012-2014 the Bulgarian economy will grow at an annual rate of 3.6%-4.4%. The 2011 projection is 3.6% GDP growth.
According to the biennial World Economic Outlook report of the International Monetary Fund, Bulgaria's economy will grow by 3% in 2011. The Fund has actually upgraded its 2011 economic growth project for Bulgaria, which used to be at 2.6%. IMF data also shows that in 2010 the Bulgarian economy grew by 0.2%.
The IMF expectations for the Bulgarian economy in 2012 are also lower than those of the Bulgarian Cabinet; the April 2011 World Economic Outlook predicts Bulgarian economic growth of 3.5%, while Bulgaria's current projection stands at 4.1% and was even higher a month ago.