Transcript Petar Ganev

Cutting Deficits
Bulgarian Experience 2009 - 2012
Petar Ganev, [email protected]
Bratislava, 2012
Policy prior to the crisis
•
•
•
•
Budget surpluses
Lowering direct taxation (10% flat tax)
Growing fiscal reserve
Budget revenues dependent on foreign
investments and consumption, not income
and profits
• Severe social security deficits even in the
good years
Crisis and recovery
GDP growth, Bulgaria 2005 - 2012
Quarterly seasonally adjusted data
8.0
6.0
4.0
2.0
-4.0
-6.0
-8.0
-10.0
2012Q1
2011Q3
2011Q1
2010Q3
2010Q1
2009Q3
2009Q1
2008Q3
2008Q1
2007Q3
2007Q1
2006Q3
2006Q1
2005Q3
-2.0
2005Q1
0.0
Revenues and spending in the
crisis years
34,000
4.0%
3.0%
32,000
2.0%
30,000
1.0%
28,000
0.0%
26,000
-1.0%
-2.0%
24,000
-3.0%
22,000
-4.0%
20,000
-5.0%
2007
2008
Surplus/Deficit % GDP
2009
2010
Revenues (BGN million)
2011
2012*
2013**
Expenditures (BGN million)
Fiscal reserves
Fiscal reserves, Bulgaria 2007-2011 (BGN million)
14,000
12,000
10,000
8,000
6,000
4,000
2,000
VII.2011
I.2011
VII.2010
I.2010
VII.2009
I.2009
VII.2008
I.2008
VII.2007
I.2007
0
Crisis facts
• Revenues down – tax revenues recovered
to the pre-crisis levels in 2012
• Spending up – despite the freeze on
pensions and salaries
• Excessive deficits in 2009/2010
• Overall BGN 5 billion (EUR 2,5 billion) in
deficits in 2009-2011 covered with fiscal
reserves
Crisis measures – revenue side
• No major changes (10% flat tax on income
and profits; 20% VAT)
• Excise duties up – catching up on EU
• Some minor new taxes – on insurance
premiums and tourism tax
• Local and State fees up
• No major changes in social security
contributions
Crisis measures – expenditure side
• Freeze on pensions after populist increase
in 2009 (just before elections)
• Freeze on salaries in the administration
• Capital expenditures used as a buffer
• Some changes in social security
(retirement age*) to answer the rising costs
• Delays in payments to business – including
10% “voluntary” haircut
Roundabout policies
• “Sacred” funds to be spend:
– Healthcare reserve (BGN 1,3 billion) transformed and
spend…
– Pensions reserve (Silver fund) put into question, but
survived…
– Private “professional” pension funds – nationalization
of BGN 100 million (Constitutional court ruling…)
• Burden on business
– Income policies through private sector – rising
minimum wage and minimum social security
threshold (employment down as result)
– Shifting social security costs to businesses – first
three days of illness paid by the employer and not by
the respective State fund.
Budget Rules (2011)
• Consolidated government expenditures
can not exceed 40% of GDP
• Budget deficit can not fall below 2% of
GDP
• Still debated on constitutional level (2/3
votes in Parliament)
Conclusions
• Austerity = freeze on salaries and pensions (no
actual cuts in absolute terms)
• Deficits = fiscal reserve at critical minimum (no
healthcare reserve; just the Silver fund)
• Income policies shifted to private sector = no
recovery in employment
• As expected spending is again on the agenda in
Budget 2013 – rising pensions and salaries
Cutting Deficits
Bulgarian Experience 2009 - 2012
Petar Ganev, [email protected]
Bratislava, 2012