Articles

While waiting for the express assessment of the National Statistics Institute for GDP growth for the fourth quarter of 2009, more and more organizations and independent analysts update their forecasts about economic growth for Bulgaria for 2009 and 2010. While in the fall of 2009 the forecasts were for a 6-7% drop in GDP for the current year and 1.5-2.5% for 2010, now the expectations have sharply risen.

Part of disposable income in each country comes from funds earned in another country and sent or brought home. The difference between money received from abroad and paid to foreigners determines whether a country is a net exporter or importer of labor. As it could be expected, these flows have the largest positive values (as % of GDP) in less developed countries where emigration and seasonal employment in other countries are most significant.

The crisis affected everything – the economy stopped growing, the unemployment began to increase, the foreign investments disappeared somewhere, getting credits became very complicated, the revenues to the budget shrunk and in general things are not rosy at all. However, there is something which is not affected by the crisis. Something which is so fare from the market processes and in general from rational thinking that there is not a crisis which could frighten it. Naturally, I am speaking about the so called budgetary expenses...

At the end of May the registered unemployed in the country went beyond the limit of 250 thousand people, which is actually sending us beck to the levels of the previous year. The official data of the National Employment Agency indicate that from October 2008 we have a continuous increase of the number of unemployed in the country, which is in contrast to the trend from previous months.

Two members of the cabinet (from the same party) for some time have been discussing in the media the social security in the country.

“The most important thing to remember is that inflation is not an act of God; inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy…”

The construction of a bridge connecting Sicily with the main land of Italy is expected “to save” the Italian economy from recession. Exactly the bridge to Sicily is the byword for large infrastructural projects (total cost €17 billion) planned by the Italian government, which aim at creation of tens of thousands of jobs. In this part the “Berlusconi’s” plan to a large extend looks alike our “Stanishev’s” plan. The message is clear – “we are in a crisis … let us start spending”.

The crisis gave rise to many requests from almost every sector. The continuous “pulling of the blanket” increased the efforts of all separate groups from the economic life which made the pressure on the government even stronger.

The National Statistics Institute (NSI) published the data about the GDP for the last year. During 2008 GDP of the country reached 66 728 million levs, which means that in real terms, compared to 2007, the increase is by 6 per cent. The data shows that the GDP per capita is 8 712 levs.

One of my main claims in the article published a week ago “The Growth of GDP and the problems during 2008” was that the foreign trade deficit was not Bulgaria’s most serious problem in the last year and that actually the deficit was created by something good – the record breaking for the country inflow of foreign investments. My other position, respectively, was that during the crisis, when the foreign investors are pulling out of Bulgaria and our foreign trade is shrinking, that would lead to reduction of the trade deficit.

We all know that the economic activity is directed towards making profit. This is the main motive which makes people to invest funds and time, to take risks and to be entrepreneurs. Some succeed in their pursuit of profit, others fail. This however does not give a clear answer whether or not it is mandatory that the entrepreneurs must aim towards profit. What would happen if there is an entrepreneur, who would like to provide a given service and announces publicly that he does not aim for profit. Would this be a crime?

During the past few months the Government announced several times its intentions for big spending for a number of activities. On the other hand, the financial crisis opened a new opportunity for political spending. The big spending is defended under the so-called Government measures against the crisis. Here the Bulgarian Government has common grounds with the new Obama administration – one part of the programs in both countries for stimulating the economy is directed towards infrastructure projects.

Two weeks ago was presented the sixth consecutive Alternative Budget with low taxes of the Institute for Market Economics (IME), between the first and the second reading of Budget 2009 in the Parliament. The alternative budgets of IME had always aimed at presenting a different view of the state finances, based on the notion that changes in Bulgaria are possible and should not be postponed in time but accepted now, at the present moment.

The European commission (EC) announced recently a plan for economic recovery, which aims are to stimulate consumer demand, to reduce the effects on the workers from the economic crisis, to improve competitiveness of the European economy in the future and to direct it towards greener production. This must happen by spending €200 billion, which should be gathered through payments from the budgets of the separate states (€170 billion) and the common budget (€30 billion).

The World economic crisis is being used as an excuse for undertaking packages of measures in the different countries, which in general are setting aside very large amounts of money. In the United States the amount in question is over 700 billion dollars, besides those, similar plans are being discussed in Great Britain (about 500 billion pounds), Germany (approximately 480 billion Euros), France (360 billion Euros), Italy, Ireland. The aim of these packages is to “restore confidence” in the financial markets...

The news from the middle of this week, is that the director of the Bulgarian Agency for Investments (BAI) was commenting the changes in the Bill for investments. These changes are a consequence from the crisis and the intention of the Government to do something to counteract it.

Bulgaria got a 68th place in The Economic Freedom Around the World, Annual report 2008, prepared by the Canadian Institute "Fraser" and distributed in Bulgaria by the Institute of Market Economics. According to this report, by taking into account the changes in methodology and recalculation for the previous years, Bulgaria has moved upwards by 6 places from the last year’s 74th position.

The National Statistics Institute announced officially the preliminary data about the Gross Domestic Product (GDP) during the second quarter and respectively the first half of 2008. At the same time, however the situation on the international financial markets worsened significantly, as some of the largest investment banks got into a very difficult position and the main indices are falling sharply.

The Ministry of Finance published the data about the execution of the consolidated budget for the first half of 2008. The revenues are over 14 billion levs, while the expenses are 9.89 billion levs, which means that the surplus is over 3.78 billion levs or over 5.5% of the expected GDP for the year.