Counting Down

Economic News

22 Jul 2010
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Approval of Bulgaria's handling of its economic reform programme this week by the International Monetary Fund (IMF) was welcome news for the country's leaders, as they square up for next month's general elections. Meanwhile, the main opposition group unveiled its economic plans, with ideas for an expansion of social spending - a programme unlikely to find great favour with the Fund.



The IMF board gave the green light in Washington on May 18, with Bulgarian Finance Ministry officials telling the press that this represented the result of stable macroeconomic indexes, a flexible fiscal policy and the establishment of the necessary preconditions for increased economic growth.



For their part, Fund officials agreed that Bulgaria had stabilised its market-orientated economy and was successfully carrying out EU accession-orientated financial and economic reforms.



Welcome news for Prime Minister Simeon Saxe-Coburg's battered coalition government, especially as only one month remains before the June 25 general election. Economic policy also took centre stage in the campaign this week, as the main opposition Coalition for Bulgaria, largely dominated by the Bulgarian Socialist Party (BSP), unveiled its plans.



BSP leader Sergey Stanishev promised citizens a 10-point plan, which, he claimed, would follow Bulgaria's national interests while also following the path to EU membership.



The plan targets economic growth of 6% in 2006, rising to 8% in 2009. Employment is also a major issue, with the aim of creating at least 240,000 new jobs around the country included, which would cut unemployment by 10%. Education would also receive a boost in spending, first to 5% of GDP, then eventually 5.8%.



Scientific research and development would also get a hike, along with health services, which would receive a spending boost to 6% of GDP by 2009.



Elsewhere, the coalition promises to battle against corruption, boost regional development, modernise the military and spend more on national cultural projects.



Such a boost in government spending may go down well with voters, many of whom have so far seen little in personal income improvements out of the years of financial and economic reform presided over by the current administration.



Yet given the difficulties Saxe-Coburg's coalition has had in extracting approval of more minor improvements in state budgeting from the IMF, it is hard to see how the Coalition for Bulgaria's spending plans will sit with the Fund's two-year reform drive.



On August 6, 2004, the IMF Board approved a 25-month stand-by arrangement with Bulgaria, pledging some $146m to support the government's economic programme for 2004-2006.



Back then, Finance Minister Milen Velchev and IMF mission leader Hans Flickenschild agreed a deal on a budget surplus of 1% of GDP, which would be created by some Lv327m ($212m) in government expenditure cuts.



Inflation was also targeted to fall to 3% by end of this year, with government expenditure allowed to rise 6% year-on-year due to better than expected economic performance. This extra was then closely fought over, with the government eventually raising the minimum wage to Lv150 ($97.23) despite IMF objections.



The unveiling of the opposition coalition's economic package also comes at a time when its main constituent, the BSP, has been doing well at the polls.



A recent survey by pollsters ASSA-M showed that in the capital, Sofia, the BSP had some 24% of the vote, making it the most popular party. At the same time, a survey by AFIS conducted nationwide between April 23 and May 3 showed 26.7% support for the BSP - again, making it the largest party.



Yet support for the prime minister's National Movement for Simeon II (NMSII) party has also not experienced the collapse many had feared a year ago, when the party had become almost statistically irrelevant in many a poll. NMSII has13.8% support nationwide, according to the AFIS poll, while also enjoying 15% support in Sofia, according to ASSA-M.



At the same time, some 12% of the capital's voters prefer the United Democratic Forces (UDF), a higher number than the 8.1% who said they favoured the UDF in the nationwide poll. The rightist UDF also suffered a setback this week with the resignation of deputy Vasil Vassilev, who had been left off the party's list. The UDF National Council had earlier decided that the mayor of Pleven, Nayden Zelenogorski, would head the list, despite 10 party regional organisations supporting Vassilev.



Single party rule has never really been a possible outcome of the June 25 election, with coalition building a vital part of the process. Given this, the BSP's lead need not necessarily translate into power in office. The signs that voters are also turning back to the NMSII as crunch time approaches are also indicative that all may still be to play for, as the country enters the final weeks of campaigning.

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