Bulgaria's '07 Budget Surplus of 3.8% of GDP

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Bulgaria's '07 Budget Surplus of 3.8% of GDP

The resources reallocated by the Bulgarian government through the budget last year reached 44% of the GDP forecast for 2007, according to data released by the finance ministry. Budget revenues are reported at just over 24 bln levs while outlays topped 21.4 bln levs, indicating the incumbents failed to deliver on their promise for a reallocation rate of no more than 40%. The reallocation rate for 2006 was 40.7% of GDP.

EU allocations in 2007 were flat year-on-year, suggesting that the budget revenue overperformance is due to domestic sources. Foreign experts commented that the figures represent an excessive intervention in the economy on the part of the government.

The budget surplus is also toying with record levels: some 3.8% of GDP or 2.11 bln levs have been allocated to the fiscal reserve.

The surplus was nearing 3.96 bln levs by the end of November 2007 before the government decided to spend 1.4 bln levs on infrastructure and municipal projects and on measures stemming from the country's EU membership. The surplus has been generated mainly due to better-than-forecast budget revenues which rose 20% in 2007, said the finance ministry.

2007 tax revenues totaled 13.9 bln levs, beating the government same-year estimate by 9.5% and the full-year figure for 2006 by 19.5%. VAT revenues increased 13.3% year-on-year to 6.6 bln levs in 2007.

The figures suggest that the rate of tax collection is improving, a good argument in favor of further tax and social security cuts, said Lachezar Bogdanov from consulting group Industry Watch.

The pay-off from the corporate tax and social security cuts was an increase in revenues from these sources which led to the budget overperformance, said Georgi Angelov, an Open Society senior economist.

The aim of the surplus is to offset the risks created by the rising c/a deficit, said finance minister Plamen Oresharski. The c/a gap is projected to widen to over 20% of GDP.

The global credit crunch is enhancing the risk for a country like Bulgaria, said the official. And in that case the country may decide to further tighten its fiscal policy if need be. The 2008 budget surplus is projected at 3% of GDP.

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