One of the biggest risks in the 2026 budget is that the state administration has adopted an approach of linking salaries to the average salary. This means automatic salary increases without being tied to performance indicators.
„All this leads to great risks and great pressure on costs. It comes to a point where instead of taking on debt for infrastructure and investments, we take out loans to pay salaries to the administration. This is the first thing that needs to stop“, said Lidiya Shuleva, former social minister and business and financial consultant during the 10th annual risk management conference “Bulgaria between growth and risk“.
“If we want a normal budget for 2026, this link to automatic wage increases must be removed or at least a decision must be made to freeze it“, she is categorical.
By increasing wages in the budget sphere, they form a higher average wage. The following year, the average wage becomes even higher, which automatically fuels growth.
There are a number of options for optimizing the budget. There is often talk of filling the budget by increasing taxes and social security contributions. However, before this lever of increasing budget revenues is activated, there are other mechanisms with which to fill the state treasury. For example, Bulgaria has not yet reached European levels in terms of excise duties on alcohol, cigarettes and fuels. “There is a fairly large opportunity for an increase there and this is a significant revenue stream in the budget“, says Shuleva.
There are also reserves in the pension sector. There is no question of reducing pensions, but there is no reason for the 60 leva supplement in connection with the coronavirus for new pensioners. “Also, a number of social payments go through the pension system completely inadequately. With these huge salaries, civil servants do not send taxes and social security contributions. These are big pennies“, concludes Shuleva. Currently, nearly 400,000 people work in the state sector, which is a lot against the background of 3 million workers in Bulgaria.
Also, incomes in Bulgaria are very low compared to the European average. One way to increase it is by focusing on producing greater added value.
The conference participants did not ignore the topic of Bulgaria's accession to the eurozone. If the question so far was about the pros and cons of possible accession, today and in the future the agenda will be the question of which indicators to monitor in order to understand whether it was successful and healthy for the Bulgarian economy.
„We strongly hope to follow the path of Croatia. Joining the eurozone is the final culmination of a long journey that Bulgaria has taken. With the eurozone and Schengen, we have all the prerequisites for an upward trend in terms of investment, be it foreign or local,“ said financier Ivan Gechev.
One of the indicators that we need to monitor is the quality of life of people. In 2-3 years they should live better than today. “In the short term, we need to look at what is happening with the state budget. Things could “break“ there. Excessive state intervention upon joining the eurozone also poses risks. If business suffers, the average Bulgarian will feel it. Tourism is also an important factor. The sector should show growth within 6-9 months,“ said Gechev.
As for Bulgaria's place in Central and Eastern Europe (CEE), our country is reporting both economic growth and inflation above the average for the region. However, economic growth is not sustainable. The reason is that it is driven by domestic consumption, and deficit spending, financed by issuing debt, is not used to restructure the economy and does not lead to an improvement in the productivity of the Bulgarian economy. Inflation will remain high, mainly due to domestic consumption.
For the current year, Coface forecasts a growth of the Bulgarian economy of 3.1%, and for 2026 - 2.6%. Thus, our country ranks in the TOP 3 of the CEE countries with the fastest growing economy, along with Croatia and Poland.
The problem with foreign investments continues to deepen. The reported growth in investment flows is due not to the entry of fresh investments from abroad, but to the reinvestment of profits.