Title: BULGARIA AFTER THE EU ACCESSION:CHALLENGES AND POLICY OPTIONS
1BULGARIA AFTER THE EU ACCESSIONCHALLENGES AND
POLICY OPTIONS
- TSVETAN MANCHEV
- DEPUTY GOVERNOR
- BULGARIAN NATIONAL BANK
2OUTLINE
- Key conclusions from the recent development
- Policy options
- The road ahead
3 RECENT DEVELOPMENT KEY CONCLUSIONS
- Robust and stable growth at 5 on average for 10
consecutive years - Relatively low one digit inflation, but
accelerating after accession - Sound government finances and declining public
debt - Accelerating capital inflows.
4RECENT DEVELOPMENT KEY CONCLUSIONS
- Investment grade ratings and declining sovereign
spreads - Sharp decline in unemployment toward EU average
rates - Stable and predictable business environment CBA,
European legislation, improving law enforcement
low taxation on both CL
5REAL GDP GROWTH
6REAL GDP GROWTH RATE IN BULGARIA AND IN THE
EUROPEAN UNION
Source Eurostat
7UNEMPLOYMENT RATE
Source National Employment Agency
8GENERAL GOVERNMENT BALANCE
Maastricht criterion
9GOVERNMENT DEBT
Maastricht criterion
10BULGARIAN SOVEREIGN SPREAD
11CURRENT ACCOUNT BALANCE AND FDI
Source BNB
12AVERAGE INFLATION
13ANNUAL GROWTH RATE OF THE CREDIT TO THE PRIVATE
SECTOR
14THE ECONOMIC CHALLENGE SUSTAINABILITY
- Increasing external imbalances
- Inflation - higher than this in the euro area and
volatile - high and volatile credit growth
- very low, even negative real interest rates
- the flexibility of the labour market.
15GENERAL CONCLUSION
- Bulgarias recent development is similar to this
in all the other Newly Acceded Countries with a
CBA - All Fixers
16SOME DIFFERENCES
- The degree of political stability
- The banking structure
- Currency structure of the agents balance sheets
- Bulgaria is not in the ERM II
- CBA? monetary policy with fixed exchange rate
regime in the former central banks do not create
inflationary financing by printing cheap money
17POLICY OPTIONS TO COPE WITH THE CHALLENGES
- The populists view not to care about the
macroeconomic stability and sustainability,
nominal or real convergence, and to seek only a
quck catch-up in the euro denominated wage and
income - Monetary and exchange rate regime change
(friendly fire from the some of the European
institutions and key politicians) - Well targeted nominal and real convergence based
on the medium-term integrated reform agenda for
the public sector aiming a greater efficiency
18 BULGARIAS OFFICIAL POLICY TO ADDRESS THE
CHALLENGES
- Tough fiscal and income policies should continue
to avoid adding pro-cyclical pressures that could
widen internal and external imbalances. The
spending and tax levers of the budget could be
used to accelerate real convergence and
productivity growth, including through the
efficient absorption of EU funds - Consistent and predictable financial sector
policies should contribute for safeguarding
financial stability through continued close
monitoring of banks risk management and capacity
to absorb adverse shocks - Structural reforms are essential for accelerating
real convergence in the sense the scope for
catching up to living standards and real wages in
the EU in a sustainable manner should depend
ultimately on raising the efficiency of available
human and real resources while providing
incentives to add to available resources.
19The Key Message
- More politics than economics does the European
integration need that?
20 Thank you for your attention!