Generic selectors
Exact matches only
Search in title
Search in content
Search in posts
Search in pages

Predictability for business must be ensured

In connection with the broad public debate on the proposed changes in the budget laws, they should be considered in the context of the forthcoming fourth wave of COVID-19 distribution, the experience gained from the previous three waves and the effect of the measures on the country’s economy. From this point of view, budget changes are necessary and timely to ensure predictability for business and citizens.

Speaking about the effect of the applied measures on the economy and its current state, it is worth looking at the express estimates of the gross domestic product (GDP) published by the National Statistical Institute (NSI) in the second quarter of 2021.

GDP for the second quarter increased by 9.6% compared to the corresponding quarter of 2020, and in value at current prices it was BGN 26,974.5 million. According to the experts of the Union for Business Initiative, mainly two factors favor the registered growth.

In the second quarter of 2020 there was a significant decline in economic activity, so the growth rate in the second quarter of 2021 is normal to be high compared to 2020. In fact, this is the first factor favoring this growth, namely the transition from declining production to growth. The stabilization of the industrial production – the automobile industry, the electronics, the production of metal products, machines and equipment, plastic products, etc. contributes to this. The increase in the volume of products produced in these sectors can be largely defined as compensatory, as a result of the “catching up” of the slow pace during the covid crisis. This is evidenced by the growth of exports of goods and services (20.3%) and the positive foreign trade balance.

Maria Petrova

At the same time, some sectors of the economy have not yet reached pre-crisis levels, making the economic crisis asymmetric, and based on aggregate GDP growth alone, no definitive conclusions can be drawn about its course, current state and irreversible economic recovery.

Rising prices of raw materials and energy resources is the second factor with a significant impact on GDP growth. This is a factor that would affect the growth of inflation.

Given that final consumption continues to account for the largest share of GDP (80.2% in the second quarter), it should be noted that the measures applied to stimulate consumption by maintaining the income of employees in closed sectors, the surcharges for pensioners, the increase in salaries of civil servants, etc., have given their positive results.

The exported data cannot yet be perceived as a lasting trend, as the impact of external asymmetric shocks on the spread of COVID-19 remains significant and businesses are still too dependent and dependent on the rate of spread of the infection and the levels of morbidity. The level of vaccinated Bulgarian citizens is far from what is recommended by health professionals to talk about sustainable control of the health crisis, especially in the spread of more virulent strains. Given this and based on the experience of previous waves of the spread of the infection in Bulgaria, its impact on the country’s economy, the measures taken to address the socio-economic consequences and the real effects of them, which we are talking about at the moment, must be approached reasonably. and to create mechanisms for adequate action and crisis control in the event of a fourth wave.

In this sense, most of the proposed changes to the budget laws for 2021 are necessary and important in order to create predictability and ensure the normal course of the next covid wave. Businesses and citizens need to know that in the event of the closure of part or all of the sectors, there will be funds provided to support them and these funds will come to them in time to really help them. The registered GDP growth for the second quarter of 2021 compared to the same period of 2020 indicates an expected increase in budget revenues due to the larger tax base, which favors the possibility of updating the budget in its expenditure part in the already mentioned areas, which are important for business and citizens.