The adjustment of the economy begins to develop according to the IMF's forecasts. In the Fund's main scenario, GDP growth is expected to slow down to 1%, and in the alternative scenario - to fall to -3%. Inflation is expected to be between 3.5 and 4.7%. The current account deficit will fall from 25% of GDP in 2008 to between 6% and 15% of GDP under different scenarios. Unemployment will also rise significantly. The difference between the scenarios depends on the inflow of capital into the economy, which varies between 10% of GDP in the baseline scenario to 0% in the alternative scenario.
Since the beginning of the yearobserves a deterioration of significant economic indicators:
· The FDI inflow in January reached only 206.2 million euros or 0.6% of GDP compared to 329.2 million euros (1% of GDP) in the same period of 2008.
· Exports decreased by 27.2% on an annual basis with a growth of 28.2% for the same period of 2008. Imports decreased by 33% on an annual basis with a growth of 19.1% for the same period of 2008.
· The current account deficit in January was 1.2% of GDP compared to a deficit of 2.4% for the same period last year. The main factor behind the reduction in the trade account deficit is the reduction in the trade deficit. The negative trade balance was 0.9% of GDP compared to 1.8% of GDP for the same period in 2008.
· Inflation, measured by the harmonized index of consumer prices, has slowed down, reaching 5.4% in February, with double-digit figures observed until October 2008.
· The total decline in industrial production for January 2009. compared to the same month of 2008. is 13.3%, and only in the mining industry it is 27.2%. The manufacturing industry also saw a decline.
· The unemployment rate started to rise and reached 6.7% in February 2009, but still remains relatively moderate.
· The slowdown in credit growth for the non-governmental sector also has a negative impact on production. In February 2009 it slowed the annual rate of change to 26.5%, and the monthly growth rate of total credit for non-financial enterprises, households and housing loans in February compared to January this year. fell below 1%. If housing loans are eliminated, credit growth for the real sector is practically 0%.
· Added to the lack of bank financing for the economy is the problem of VAT refunds. At the moment, the withheld VAT is worth BGN 560 million, with which, in practice, companies finance budget expenses interest-free.
· The 2009 budget was calculated with an overly optimistic scenario for GDP growth. In the current situation, it is clear that he will not be able to rely on the planned revenue and surplus, despite the government's declared conviction of the need for a high surplus. This necessitates limiting budget expenditures and extremely careful spending of funds from the Fiscal Reserve in the pre-election period.
· The Monetary Board has a high reserve, which, however, began to decrease both after the reduction of the regulatory requirement for mandatory minimum reserves, and due to the consumption of the Government's Fiscal Reserve deposited in the Issuance Authority.
· The banking system is stable, but there is already a deterioration in some of the supervisory indicators. In the first months of 2009 bad loans of non-financial enterprises, together with consumer and housing loans, marked a significant increase.
· With a significant drop in real estate prices, combined with a halt in capital inflows and a slowdown or negative growth in economic growth, the share of non-performing loans may increase significantly.
As the situation worsens and in the context of the upcoming election campaign, KRIB proposes the urgent implementation of the following measures:
· All main political forces to sign an agreement (pact) in which they undertake to preserve the currency legislation and the currency board and after the elections until the entry into the ERM-2 and the Eurozone, as well as to maintain macroeconomic stability and fiscal discipline. The KRIB Board of Directors decided that the organization should initiate the preparation of such a document and begin consultations with the political parties for its signing.
· Immediate conclusion of a safeguard agreement with the IMF, the negotiation of which should be most closely coordinated with the European Commission; it will have a disciplining effect, strengthen confidence in Bulgaria's stability and help speed up the process of the country's convergence to the euro zone.
· Regulation of the spending of funds from the budget and the Fiscal Reserve (FR); determination of a threshold below which the FR deposited in the BNB should not fall, since it participates in the formation of the aggregate foreign exchange reserve of the Issue Management of the BNB.
· It is imperative to start a procedure for updating the state budget or to introduce a more conservative buffer for the implementation of expenses from 90 to 80%, in view of the decline in economic activity, the slowdown in GDP and the reduced revenues in the budget.
· Improving the risk management system in the National Revenue Agency and creating a "Golden Register" for faster VAT refunds to companies that are correct taxpayers.
· Additional increase of the guaranteed minimum amount for bank deposits to 100 euros in accordance with the recommendations of the European Commission in order to maintain confidence in the banking system.
· Expansion of the program for granting loans to small and medium-sized enterprises through the Bulgarian Development Bank and improving its efficiency and effectiveness. According to KRIB's information, currently, of approved lines for 500 million BGN to commercial banks, 80 million BGN have actually been used!
· Development of hybrid (debt-equity) instruments to provide a resource for banks that grant new loans to the economy.
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