May 2021 / Bulgaria

Bulgaria has presented to EU it's Convergence Program for the period 2021-2023 with important economic data for this period.

The document was adopted last week by the Council of Ministers, but has not yet been uploaded on the Finance Ministry's website.

 It is only available on the European Commission's website. It is important to recall that the Convergence Program is a strategic document presenting the main elements of the national fiscal policy in the medium term.

According to the Convergence Program, the decline in investment will continue in 2021, but at a slower pace.

Private investment is the component that will recover most slowly from the crisis caused by COVID-19 due to the still uncertain economic environment. In 2021, GDP growth is projected to reach 2.7%.

Restrictive measures against the spread of COVID-19 will have a negative effect on household consumption in the first quarter of the year, after which it will increase, supported by increased employment.

In total for the current year consumption growth will be about 2%. As in 2020, government consumption will contribute to economic growth by nearly 1 percentage point. In 2021, exports of goods are expected to grow by 4.1% and almost reach pre-crisis levels.

The recovery of services will be smoother, predetermined by the much slower resumption of international travel.

The contribution of net exports to GDP growth will be positive (1.2 percentage points). GDP growth will accelerate to 3.6% in 2022, and in 2023 and 2024 economic growth will slow to 3.4 and 2.7%, respectively. Should be recalled that in the Convergence Program 2020-2023 forecasts were presented only for 2020. Expectations at that time were for a decline in real GDP by 3%.

In fact, GDP shrank by 4.2%.

According to estimates by the Ministry of Finance, potential GDP growth in 2020 was 1.7%, so the deviation from potential is negative at 3.1%.

The main reason for the weaker growth  during the year was the negative contribution of the labor factor. The expected recovery in employment in the coming years will lead to accelerated growth of potential GDP and it will reach 2.3% in 2023.

The increase in investment will also lead to a more serious contribution of capital to growth in 2023. Total factor productivity (OFP) will contribute 1.2 - 1.3 percentage points for potential growth during the period considered. In 2024, a slight slowdown in growth to 2.2% is expected, which will come both in terms of capital and labor.

"The further increase of the employment will be limited by the negative demographic processes in the country ", is written in the Convergence Program.

Source: Novinite

The average salary registered over 10 percent growth year-on- year.On the other hand, the share of remuneration from work in the overall household budgets has shrunk, while the share of incomes from pensions and social benefits has grown.

Despite the reported growth of the average salary up to BGN 1,500, this does not apply to all sectors of the economy. Traditionally, the highest incomes are in the information and communication technologies and in the health sphere - due to the additional payments to the frontline medics.

The sectors requiring higher skills continue to push forward. At the same time we see the effect of stagnating sectors, such as hospitality and restaurant businesses which were hit the hardest by the coronavirus crisis and the salaries in these sectors are the lowest, commented Zornitsa Slavova from the Institute of Market Economics.

The salary is still the largest contribution to a household budget but its share in the overall income is shrinking. For the first time the share of a salary in the households’ earnings reached 55 percent due to the impact of the crisis. At the same time the share of social benefits and aid as well as pensions is growing,” Zornitsa Slavova added.

Source: Novinite

Bulgaria has introduced amendments to Ordinance № H-10 of 24 August 2006 on the refunding of value added tax (VAT) paid to foreign persons not established in the territory of the European Union. The main amendments are the following:

• extension of the scope of application for VAT refunds to non-EU persons. As of 1 July 2021, non-EU persons would be able to apply for a refund of VAT incurred in Bulgaria, if they are considered to perform (i) supplies under the non-Union scheme; (ii) intra-EU distance sales of goods and supplies of goods facilitated by electronic interfaces under the Union scheme; and (iii) supplies of goods for which they apply the scheme for distance sales of goods imported from third countries/territories; and
• non-EU persons having a fixed establishment in Bulgaria would be able to apply for a VAT refund in Bulgaria even if they do not perform supplies using a place of supply in Bulgaria.

The amendments to the VAT Act have been promulgated in the State Gazette. The official document, issued on 1 May 2021.