The rulers have a choice - to start thinking about budget consolidation by limiting the growth of expenditures as early as this fall or to wait for the deficit to become unsustainable in 2026. This is the conclusion of the chief economist of the Institute for Market Economics Lachezar Bogdanov, published in the organization's traditional bulletin, quoted by the Bulgarian National Radio. His analysis is dictated by the latest data on budget execution, which show a deficit of over 4.2 billion leva.
According to Bogdanov, the budget execution at the moment is not surprising, but if the growth of expenses is not limited, the problem will simply recede in time. In the commentary entitled "Budgetary collapse with a tailwind", the economist notes with alarm that this is rather the scenario chosen by the government.
"Its most obvious drawback is that each year of postponement increases the scale of the problem and accordingly requires a much greater correction in the trajectory of revenues and expenses in order to reduce the deficit. Or, to simplify - it is one thing for expenses to still grow, but at a lower rate, it is another to freeze them, and it is dramatically different when they have to shrink in nominal value. And because the latter is very difficult for politicians, they will propose raising taxes," Bogdanov suggests, recalling that the medium-term fiscal structural plan for 2027 already includes an increase in the amount of social security contributions.
Ideas for raising other taxes are already beginning to be tested - initially in an indirect, timid manner and by external institutions or analysts - the economist notes. He also recalls that the state of the fiscal system is also determined by one-off actions such as the advance tax demanded from banks, which, however, means that revenues will lag behind next year.
The debt burden is also becoming greater, and in conditions when income and consumption are growing - a trend that may slow down in the coming years due to the difficulties in the European economy.