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© 2010 International Monetary Fund
June 2010
IMF Country Report No. 10/160
Bulgaria: 2010 Article IV Consultation—Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Bulgaria
The following documents have been released and are included in this package:
The staff report, prepared by a staff team of the IMF, following discussions that ended on March 1, 2010, with the officials of Bulgaria on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 12, 2010. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff supplement of April 28, 2010.
A Public Information Notice (PIN).
A statement by the Executive Director for Bulgaria
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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E-mail: publications@imf.org Internet: http://www.imf.org
International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
BULGARIA
Staff Report for the 2010 Article IV Consultation
Prepared by the Staff Representative for the 2010 Consultation with Bulgaria
Approved by Anne-Marie Gulde and Aasim Hussain
April 12, 2010
Consultation discussions were held in Sofia, February 18–March 1, 2010. The staff team met with Minister of Finance S. Djankov, Central Bank Governor I. Iskrov, other senior officials, financial and business sector representatives, unions, representatives from international financial institutions, the diplomatic community, and the media. The mission team included Mr. B. B. Bakker (head), Ms. P. Mitra and Ms. J. Zhou (all EUR), Ms. A. Schaechter (FAD), Mr. J. Vandenbussche (MCM), and Mr. E. Vesperoni (SPR). Mr. T. Lybek (Regional Resident Representative) and Ms. I. Paliova (Resident Representative Office) assisted the mission. Ms. A. M. Gulde (EUR) joined the discussions on February 24–26. Mr. V. Yotzov (OED) attended most of the meetings. Teams from the EC, ECB, and the World Bank were also present.
Political Background: Following elections in July 2009, the center-right Citizens for European Development of Bulgaria (GERB), led by Mr. B. Borisov, the former Mayor of Sofia, formed a new minority government, with 116 out of 240 seats in the National Assembly. It has promised to crack down on organized crime and corruption and to reduce the role of the government. The largest opposition parties include the Bulgarian Socialist Party, the National Movement for Stability and Progress (the former King Simeon Saxe-Coburg’s party), and the Movement for Rights and Freedom. The next parliamentary elections will take place in July 2013, while the presidential election is scheduled for October 2011.
Fund Relations and Exchange Rate Regime: The previous Article IV consultation was concluded by the Executive Board on March 4, 2009. Since July 1, 1997, the Bulgarian National Bank has operated a currency board arrangement, pegged to the euro at the rate of lev 1.95583 per €1. Bulgaria has accepted the obligations of Article VIII, Sections 2–4, and maintains an exchange system free of restriction on the making of payments and transfers for current international transfers.
Contents
I. Staff Appraisal and Executive Summary
II. Introduction
III. The Global Crisis and the End of the Capital-Inflows Driven Boom
A. The Boom of 2003–08
B. The Global Crisis of 2008–09
C. Outlook for 2010 and Risks
IV. Policy Challenges
A. ERM-II Membership and Euro Adoption
B. Shifting Growth Towards the Tradable Sector
C. Fiscal Policy
D. Financial Sector Stability
Boxes
1. Bulgaria’s Reactions to Past IMF Advice
2. Reserve Coverage
3. Bulgaria: Competitiveness
4. Structural Reforms and Convergence of the Bulgarian Economy
Figures
1. External Shocks and Recession
2. Capital Inflows and Credit Boom
3. Factors Behind the Domestic Demand Bust
4. Adjustment of Imbalances
5. Stabilization, but High Vulnerabilities
6. Fiscal Policy
7. Financial Sector
8. Financial Markets
9. Competitiveness
10. External Debt Sustainability: Bound Tests
Tables
1. Gross External Debt, 2002–09
2. International Investment Position, 2004–09
3. Selected Economic and Social Indicators, 2005–11
4. Macroeconomic Framework, 2007–15
5. Real GDP Components and Implicit Deflators, 2007–15
6. Balance of Payments, 2007–15
7. External Financial Assets and Liabilities, 2008–15
8. General Government Operations, 2007–15
9. Financial Soundness Indicators, 2004–09
10. External Debt Sustainability Framework, 2005–15
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INTERNATIONAL MONETARY FUND
BULGARIA
Staff Report for the 2010 Article IV Consultation—Informational Annex
Prepared by the European Department
April 16, 2010
Contents
I. Financial Position in the Fund
II. World Bank Relations
III. Statistical Issues
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INTERNATIONAL MONETARY FUND
BULGARIA
Staff Report for the Article IV Consultation—Supplementary Information
Prepared by the European Department
(In Consultation with Other Departments)
Approved by Anne-Marie Gulde-Wolf and Aasim Husain
April 27, 2010
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Public Information Notice (PIN) No. 10/69
FOR IMMEDIATE RELEASE
June 2, 2010
International Monetary Fund
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