A smooth fiscal consolidation is needed, which will have a stabilizing effect on economic activity in our country. How exactly this fiscal consolidation will be carried out, we come to the question of "who will pay the bill". This is one of the most important recommendations in the report of the Council for Economic Analysis (CEA), said in an interview with the Bulgarian National Radio Assoc. Prof. Plamen Nenov, Secretary of the CEA.
"The analysis gives quite specific recommendations, the most important of which is that in the conditions of quite high economic activity in the country, according to BNB data, which is already above the potential of the economy, a smooth fiscal consolidation is needed. It will have a stabilizing effect on economic activity. There are different ways to do it. In my opinion, consolidation should be smooth, because a fast one would cool the economy too quickly. What are the instruments of smooth consolidation, the decision is political", he said on the "12+3" program.
And he pointed out the use of VAT as a tool to increase it in order to consolidate the budget:
"This is not the most optimal tool, because increasing VAT would have a short-term inflationary effect."
Assoc. Prof. Nenov pointed out that the debate on the budget and taxes should remain on the agenda for some time.
He commented on the third report in a row of the Council for Economic Analysis – "Macroeconomic effects of the introduction of the euro".
"I think that these discussions about the budget and taxation with income policies are entering society with greater force. These topics, on which we will start a debate, are important, have medium-term and long-term dimensions and short-term effects of joining the euro, but also in relation to previous demographic trends in the country", he said and announced that there is also a budget crisis in Norway.
And he pointed out that the report examines the main channels of impact:
"The main conclusion is that the main channel went through a reduction in currency risk, eliminating residual risk. Currency risk affects other risks in the economy, interest rates. With local real financial assets and the reduction of this risk, other risks in the economy also decrease. And interest rates are reduced, access to financing is improved, asset prices, such as the stock exchange, housing, increase, and from there an effect on the real economy is observed. The demand for labor, labor wages, investments are increased, which leads to an increase in GDP," explained Assoc. Prof. Nenov.
He also commented on the data submitted by Bulgaria on entering the eurozone:
"For Bulgaria, whatever residual currency risk there may be, because Bulgaria is in a currency board, it has already been eliminated, because it is entering the eurozone. Even if there were manipulations, the very effect of reducing currency risk passes through the economy. It is irreversible, the question is how big it would be for Bulgaria. Bulgaria is in a currency board and there are no financial shocks that would increase the risk, as was the case with Estonia – switched to the euro in 2012 after a major financial crisis."