ECONOMY

Sofia targeting 3 pct budget surplus in 2009

SOFIA (Reuters) – Bulgaria will aim for a fiscal surplus of 3 percent of gross domestic product next year, the same as its 2008 fiscal target, to counter risks from global financial woes, Prime Minister Sergei Stanishev said yesterday. «We will keep the fiscal surplus at 3 percent of GDP as an insurance, as a guarantee against the potential risks and also as a guarantee against the high inflation,» Stanishev told reporters at the end of a two-day meeting of the ruling coalition. Consumer price inflation quickened to 14.2 percent year-on-year in March and analysts expect it to remain in double digits by year-end due to planned electricity and water price hikes, high global fuel prices and strong domestic demand. Stanishev said that the strict fiscal stance will protect the European Union newcomer’s open economy and ensure the stability of its currency board which pegs its lev to the euro and significantly limits central bank operations. Bulgaria pursues one of the tightest fiscal policies in Europe, with its economy increasingly vulnerable to external shocks as its current account deficit soared to 20.5 percent of GDP in 2007 and is seen above 20 percent of GDP this year. Analysts have warned that Bulgaria’s economy may face a hard landing due to its hefty external shortfall and the expected slowdown of foreign direct investment due to global financial woes. The Balkan country has run fiscal surpluses since 2002. Stanishev said that despite planned restraints on public spending, the Socialist-led government will ensure enough funds for social support and will increase funds for healthcare, by increasing the healthcare tax to 8 percent from current 6 percent. The hike will not increase the social security burden, as it will cut some other social security payments. The government will also increase pensions by 10.35 percent as of July and will recalculate the payments for 1.2 million retired people in the country of 7.7 million as of October, which will cost about 3.96 billion levs ($3.13 billion).