Brussels monitors Bulgaria strictly with regard to possible economic imbalances

Bulgaria was included in the group of 12 EU member-states with macroeconomic imbalances which must be analysed in depth, according to the Early Warning Report of the European Commission (EC) presented yesterday. The evaluation is based on ten key individual indicators, for each of which there is an estimated threshold. If exceeded, special attention has to be paid. Our country has already exceeded the threshold for three indicators for external imbalances, as well as one threshold for internal imbalances - the current account balance, net international investment position as a percentage of GDP, nominal unit labour costs and the debt of the private sector. According to the Ministry of Finance, the indicators are based on the average values ​​for a 3 - or 5-year period in order not to reflect the current situation but to report financial development.

In terms of the current account balance, for example, in 2010, Bulgaria failed to cover the threshold of a deficit of below (-4%) of GDP. In 2008 and 2009, it was (-23.1) and (-8.9%), respectively. The Ministry of Finance, however, explained that the large deficit was due to large foreign financial flows before the onset of the crisis and, in the medium-term, Bulgaria is expected to comply with these requirements.

The negative value of the net international investment position for 2010 over the planned 35% of GDP was a result of the substantial flow of capital in the form of foreign investment in the local banking system made by the parent banks in the years before the crisis, as well as due to the relatively low GDP level, compared to the infused capital. According to MF, the deficit will shrink by 26 points by 2013. The indicator of private sector indebtedness involves all kinds of liabilities of companies and households, both to financial institutions and amongst themselves, as well as to parent companies and company owners. At the end of 2010, the ratio of total liabilities of the private sector to GDP was 169%, compared to the maximum set limit of 160%.

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