From economist Georgi Vulджев’s Facebook profile:
Some points made during the official presentation of the 2027 Budget have made me more optimistic than before.
1. The lack of budgetary discipline and the irresponsible inflation of spending were identified as the main problems of fiscal policy in recent years. Responsibility for the situation was rightly attributed to the government’s most vocal current critics.
The prime minister clearly stated that the current government plans to address its predecessors’ lack of fiscal discipline and reduce the deficit to below 3% of GDP by 2029.
2. Cutting spending, primarily current personnel expenditure, was identified as an unequivocal priority by Prime Minister Radev. Reducing the size of the administration was promised as a key element of budget policy. See the chart below.
Specific figures by ministry were cited, and administrative reform was promised through the merger or elimination of duplicating structures.
3. Even in the context of a very large deficit, measures to stimulate investment are being planned. “We want to develop the initiative of the Bulgarian investor” - this is what the prime minister said in connection with raising the threshold for priority investments. This is very important, because it is high time Bulgaria became capable of generating large-scale domestic investment.
4. Accelerated high-tech economic development in areas such as artificial intelligence and robotics is being identified as a key priority. The prime minister said something extremely important:
"Europe must develop robotics because it is facing a demographic collapse that is being offset by migrants."
It is no coincidence that EKIP has been sounding the alarm on this issue since last year. Robotics, digitalisation, artificial intelligence - this must be the path of future economic development. Not cheap migrant labour.
There were also other positive signals in the presentation, but these are the most important ones for me.
However, some very important questions remain. For example, given that according to the initial calculations, revenue from the one-off “Windfall Profits” tax appears likely to account for most of the reduction in the deficit next year, how will it be ensured that the deficit does not start rising again in 2028, when this tax is no longer in place?
I hope this very important question will be answered in the medium-term budget plan, which I expect to be published later today.
Planning budget consolidation to a large extent through one-off measures is simply an unsustainable approach in the long term. It contradicts the otherwise encouraging long-term trajectory promised by the government.
P.S. Another comprehensive criticism is that although it is moving in the right direction, in my view the budget framework could have been more ambitious. This is particularly true with regard to administrative reform: new technologies, especially artificial intelligence, allow for efficiencies that were not possible even five years ago.