2024-01-20-世界银行-保加利亚公共财政评论2023_90页_823kb

Summary: Bulgaria Public Finance Review 2023

Key Fiscal Position

Bulgaria maintains fiscal discipline with low public debt (around 25-29% GDP) and historically low deficits or surpluses. However, recent shocks, including the COVID-19 pandemic and the energy crisis from Russia's invasion of Ukraine, have led to modest increases in deficits, peaking at 2.9% of GDP in 2022. The country's fiscal space is constrained, and consolidation is needed to meet eurozone accession norms and ensure long-term sustainability.

Fiscal Policy Developments

The aftermath of the pandemic and energy crisis saw expanded fiscal support measures, but slow phasing-out has kept deficits high. Fiscal policy is largely countercyclical, though political uncertainty and delayed reforms in 2021-2022 hampered the response. Bulgaria's growth prospects are tied to demographic trends and structural reforms, with a medium-term trajectory projected to stabilize around 3% GDP growth if consolidation is pursued.

Government Revenues

Tax revenues, particularly VAT, dominate revenue collection, but low direct taxes and compliance challenges limit overall collection. The VAT gap is estimated at 6.3% of VAT tax liability, close to the EU average. Bottom-up studies suggest top-down estimates may understate noncompliance, particularly among medium-sized businesses and certain sectors. Health taxes (on tobacco and alcohol) offer opportunities for revenue increases, potentially boosting collection by 0.3% of GDP while reducing consumption of harmful products.

Fiscal Spending

Total spending is low relative to EU peers, with pensions and public sector wages being the largest components. Capital spending has declined, raising concerns about investment in green and digital transitions. Public procurement is inefficient due to noncompetitive practices, potentially saving up to 5.3% of contract values (BGN 1.3 billion) through increased competition. Education spending does not correlate with improved learning outcomes, and social spending, while targeting child poverty partially, could be enhanced through better-designed tax deductions and child benefits.

Fiscal Risks and Long-Term Challenges

Material fiscal risks stem from aging populations, rising healthcare costs, and potential natural disasters or banking crises. Over the long term, structural reforms are urgent to address pension and healthcare systems, climate change adaptation, and public investment inefficiencies. Maintaining revenue collection, improving expenditure effectiveness, and strategically managing fiscal risks are key to supporting growth and convergence with EU peers.

Recommendations

• Strengthen tax administration and VAT compliance through refined audit programs.
• Increase competition in public procurement and leverage EU funds for targeted investment.
• Reform social spending to improve child poverty reduction and integrate output-based metrics in education funding.
• Pursue fiscal consolidation while safeguarding social safety nets and prioritizing sustainable development.

Overall, the report emphasizes the need for balanced fiscal policies, enhanced revenue collection, and targeted spending to align with Bulgaria's eurozone ambitions and development goals.