A wage increase of 4-5 percent to 7 percent must now look like good growth because inflation has shrunk to 2-2.5 percent. This was said in an interview with BTA by the chief economist of the Institute for Market Economy Lachezar Bogdanov, who commented on the presentation of the state budget for next year and the call in this regard by the Association of Industrial Capital in Bulgaria to freeze pensions and salaries from 2025 as a measure against the increase of the budget deficit.
According to Bogdanov, in the years of high inflation and, accordingly, of nominal growth of the economy, it was very easy to raise salaries and pensions by 10-15 percent, but when inflation is under control, it is necessary to think in other numerical categories.
The Administration
Regarding the option of reducing the number of employees in the administration, he pointed out that in Bulgaria the population has decreased by 1 million people in the last 10-12 years, but at the same time the people employed in it are preserved, which is not justified. .
In addition, electronic services are already being implemented quite successfully, which means that there is great potential for the state administration to function with much less human intervention.
"As employers say it - with 20 percent, it sounds like 20 percent everywhere, but what do we do when some function is performed by one or two people, for example, in some territorial division, because if they are made redundant, the division has no way to function. We need to analyze things much more structurally and ask ourselves the question, for example, about the territorial administration - should there be so many counters on site. For many things, people can use the service electronically, or whether certain units should exist at all, if their work can be replaced by centralized communication between different administration registers and no transfer of paper from one counter to another. he commented, adding that the way in which services are carried out needs to change.
Investments
Regarding investments in the country, Bogdanov commented that they obviously suffer from the political situation in which we find ourselves. He pointed out that when a regular government was formed and there was a parliamentary majority last summer, the municipal projects that received funding were unblocked.
"In terms of private investment, Bulgaria has not recently been in the queue in Central and Eastern Europe as a share of investment from GDP. Political uncertainty greatly affects large and complex projects that are related to the regulatory environment. If you want to start mining, if your activity is related to any licensing activity of any kind, it also affects the infrastructure - access to rail transport, ports, and that requires you to have a partner on the other hand to talk to, so that your business grows in the coming years. In these situations, the lack of a regular government and a parliamentary majority, which would have taken the course of the policies, has an undeniably negative effect," noted Bogdanov.
According to him, it is good for Bulgaria to have low taxation in order to attract investors.
"Bulgaria, as a country that wants to catch up with the richer ones, and we are part of a common market in which we are on the poorer periphery and want to get richer, must strive for rapid economic growth, which means more investment, more work, more entrepreneurship, and in this sense it is good for us to have a system with relatively low taxation. For this reason, in my opinion, it is a good long-term strategy to keep taxes low and it meets the structure and needs of the Bulgarian economy, so that in the next 20 years it will grow at a faster pace," the economist pointed out.
Budget 2025
Regarding the proposed budget framework for the next year by acting finance minister Lyudmila Petkova, Bogdanov commented that she entered her role as acting minister without a clear political mandate behind which a parliamentary majority could stand. According to him, the budget will most likely be voted on by the next National Assembly (NA), which will be broadcast after the upcoming early elections on October 27.
Bogdanov believes that the Minister of Finance, in the difficult situation he is in, requests that her team make some kind of forecast for the next year in order to familiarize the public and politicians with this calculation.
"However, this is not a request for any final proposal. These are some calculations, some picture. We have sent a further request to provide us with, if possible, more detailed information to see what the estimates are, because if you look at the medium-term fiscal framework that was done in 2024 with a forecast for 2025 and 2026, there things are quite different and there is no such growth in costs," he noted.
Ultimately, it will be the responsibility of the future Parliament to look priority by priority and expenditure by expenditure at what needs to be done and what effect it will have, and if the deficit is too high, what remedial measures need to be taken, Bogdanov thinks. According to him, the next year's budget will probably be voted on in 3-4 months.
"Whatever project comes from the Ministry of Finance (MoF), it will be reshaped by the National Assembly and if there is a regular government, probably the future finance minister, if elected within this year, will most likely withdraw the project of the budget of the official ministry and will prepare its own as a budget of a new parliamentary majority, which will reflect the views and priorities for the economy, for finances, for expenses, for social policy, for taxes of the new majority," noted Bogdanov.
In his words, in the last three years we are in a very different situation.
"Until three years ago, the budget and topics related to it such as tax, spending policies came from a clear and well-structured parliamentary majority and the finance minister was the strong man who enjoyed the support of the parliamentary majority and then what came out of the Ministry of Finance with little changes was the formulated fiscal policy of the state in terms of wages, raising taxes, spending, investments, pensions. That is, then what the MoF presented was an expression of the will of a clear majority. Now we have a completely different situation, and no matter what the official minister proposes as estimates, he does not have a mandate to decide what to do with taxes and salaries, and that will remain for the new National Assembly," concluded Lachezar Bogdanov.