MINISTRY OF FINANCE ECONOMIC STABILITY AND INVESTMENT PLAMEN ORESHARSKI MINISTER OF FINANCE March 11, 2008

– MACROECONOMIC STABILITY  Smoothly operating currency board arrangement, sustainable fixed exchange rate  Prudent fiscal policy manifested in budget surpluses and a decreasing public debt  Stable banking sector and a dynamically developing capital market  High and sustainable economic growth  Convergence of price and interest levels

3 CURRENCY BOARD AND EXCHANGE RATE  The currency board arrangement continues being a stable framework for macroeconomic stability  The fixed exchange rate has been sustainable since 1997, despite the serious shocks at the international markets  According to latest research (including of the IMF) the competitiveness of the Bulgarian economy is maintained  The forex reserves increase and their volume is sufficient to cover 6 months of country’s imports

4 FISCAL POLICY  The budgetary balance is positive for a fourth year in a row securing simultaneously Maastricht criterion compliance, macroeconomic imbalances counteraction and guarantees for long-term sustainability of public finances  Public debt decreases sustainably to levels of about 20% of GDP, guaranteeing opportunities for flexibility of fiscal policies in the medium and long run

5 ECONOMIC GROWTH  Stable and sustainably high economic growth.  Higher than EU average growth. Source: NSI, AEAF, Eurostat

6 BANKING SECTOR AND CAPITAL MARKET  Stable banking sector, increasing competition and financial intermediation deepening  Improved quality and diversity of financial services  Banks’ credit activity increases investment activity in the country  Extremely dynamic capital market, a pronounced interest in the stock exchange by foreign participants  Increasing role for the capital market with respect to the economic development of the country and business financing

7 PRICE AND INTEREST LEVELS CONVERGENCE  As a result of the increased openness of capital markets in Bulgaria to EU countries interest levels gradually converge to the averages in the other Member States. A positive role is played also by the decreasing risk in the economy of the country.  The dynamics of the price level follows the real convergence path – the values of GDP per capita and the price level as shares of EU averages are very close

8 INVESTMENT AND BUSINESS ENVIRONMENT  Improving business climate  Ensuring of favourable business environment  High level of FDI  Favourable tax regime  Investment credit rating assigned by international credit rating agencies  Motives to invest in Bulgaria

9 BUSINESS CLIMATE  Constantly improving business climate – the index has almost doubled in the last two years.  Record high capacity utilization in manufacturing at 75% at end  The share of companies that face no difficulties is rising in all sectors.  Expanding domestic and foreign demand for locally produced goods and services. Source:NSI

10 BUSINESS ENVIRONMENT  Liberalization of the procedures for launching and doing business  Implementation of the electronic business registration from January 1 st, 2008  One counter service  Adoption and implementation of Program for Better Regulation  National target for administrative burden reduction up to the end of September 2008  Further encouragement of labour market flexibility and mobility  Improvement in the procedures for exports and imports

11 FOREIGN DIRECT INVESTMENT  The EU accession and improving business environment are important factors for attracting FDI.  The economic and political stability guarantee the foreign investors interest.  The annual average share of FDI in GDP in the period is expected to be about 12-15%.

12 TAX REGIME  Favorable tax environment:  10% corporate tax – the lowest in Europe;  Flat PIT at 10%;  Streamlined tax payment and refunding procedures;  Constant reduction of social security cost for employers. Source: MF

13 INVESTMENT CREDIT RATING S&P were the first to assign investment credit rating to Bulgaria on June 24, 2004, followed by Fitch on August 4, 2004 and Moody’s on March 1, 2006.

14 INCENTIVES TO INVEST IN BULGARIA  Equal tax treatment of both domestic and foreign investors.  Excellent technical skills of the workforce.  The lowest operational cost in Eastern Europe.  Infrastructural support for larger investments.  Administrative support with customized service packages.

MINISTRY OF FINANCE THANK YOU! PLAMEN ORESHARSKI MINISTER OF FINANCE