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Balancing budget main challenge for Bulgaria: think-tank

(Xinhua)
Updated: 2009-08-27 00:46

SOFIA: Bulgaria's current main economic challenge is to maintain a balanced budget amid shrinking public revenues which strongly depend on indirect taxes, the latest report of an economic think-tank said on Wednesday.

The report from Industry Watch, which has studied the Bulgarian economy for the past two years, said one of the economy's advantages was the low level of public debt and low household indebtedness.

The risk of deterioration in bank assets' quality could be neutralized by the relatively high levels of capital adequacy of banks and, if necessary, by built fiscal buffers, the report said.

The onset of the global financial crisis coincided with a period of rapid economic growth in Bulgaria, driven primarily by investment activities.

Industry Watch experts said it was difficult to differentiate how much the growth of the Bulgarian economy had been as a result of fundamental factors related to increasing productivity and the improvement of the business environment, and how much as a consequence only of the fast credit expansion.

According to the report, there are at least a few indications that Bulgaria is in a more stable position to face the financial crisis than many other European economies and the US. One of the indications is a 10-year policy of budget surpluses, which means the Bulgarian government practically does not have any debt. Another is the currency board regime, which did not allow the Bulgarian National Bank to stimulate borrowing and ease credit that would lead to credit "bubbles."