1. 31 May - 1 June 2007 Brussels Economic Forum 2007
ECONOMIC AND FINANCIAL DEVELOPMENTS IN BULGARIA ALONG ITS EU INTEGRATION
PLAMEN ORESHARSKI
MINISTER OF FINANCE
REPUBLIC OF BULGARIA
31 May - 1 June 2007
Brussels Economic Forum 2007

2. Year 2007 – a key one for Bulgaria
Bulgaria’s membership in EU – proof of the progress of the economic reforms
Functioning market economy in place
Readiness of the Government to continue the policy of sustainable economic growth

3. The course of Bulgaria during the years of transition
Political and economic reforms – less favorable starting position :
The inherited huge external debt
The crisis in former Yugoslavia and the enforced embargo
Unstable political environment
Hesitant and inconsistent economic reforms at the beginning of 1990s

4. Dimensions of the economic crisis in mid 1990s
Hyperinflation (annual average) of 1,058.4% in 1997 (242.4% monthly inflation in February 1997)
Devaluation of the local currency – 3.4 times in February compared to January 1997 or 9.5 times in 1997 compared to 1996
Bankruptcy of more than 1/3 of the commercial banks
Negative economic growth of 9.4% in 1996 and 5.6% in 1997
Debt burden of over 120% of GDP

5. The new economic policy
The crisis of – a catalyst for a new type of economic policy
Change of the monetary regime :
Stabilization of the banking and financial systems
Strengthening and modernization of the public finances
Privatization and restructuring of production assets

6. Bulgaria’s economy today
High and sustainable economic growth of around 6% per annum
More than 75% of the economy is privately owned
100% private banking sector
Dynamic development of the capital market

7. Public finance status
Budget surplus for three consecutive years – over 3.3% in 2006
Current fiscal reserve – almost six-month tax revenues
Dramatically reduced public debt – from over 120% in mid 1990s to around 20% presently

8. Monetary sector
Pegged exchange rate – EUR 1 = BGN
FX reserves – rising, covering over 6-month imports
Low interest rates
Acceptable inflation level
FDI – over 15% of GDP for 2007
Positive perception about the business climate in the country and abroad

9. Current policy goals
Maintaining macroeconomic stability
Continuing with the structural reforms
Enhancing fiscal consolidation
Strong fiscal stance in view of curbing the current account imbalance :
Reaching surplus of minimum 2%
Keeping budget expenditures below 40% of GDP

10. Situation and perspectives
Bulgaria covers 4 of the 5 nominal convergence criteria
The inflation criterion expected to be met in the medium term
Preserving the Currency Board Arrangement is crucial for:
Maintaining the economic agents’ trust in the stability of the macroeconomic framework
Ensuring smooth transition to the Euro

11. Focal points of the future economic policy measures
Leading goal - to maintain the macroeconomic equilibrium and to observe the inflation criterion in a sustainable manner
To improve the competitiveness of the economy
To enhance the flexibility of the labor market
To modernize key publicly financed spheres

12. THANK YOU!
PLAMEN ORESHARSKI
Minister of Finance