2014 was not a year of reforms, but was marked by a turn to a stronger growth-supporting fiscal policy

Author: Kristofor Pavlov, chief economist of UniCredit Bulbank

The economic growth is expected to record a modest increase of up to 1.5% in 2014. What seems more important, though, is that the growth has a wider basis (see Graph №1) – the investments, and to a lesser extent also the private consumption of households, have joined the industry and the export as factors supporting the process of recovery.

Key contribution in this regard was the turn to a stronger growth-supporting fiscal policy. This turn allowed for increase of the government's capital expenditure by 1.4 pp of GDP to an expected level of 6.5% in 2014, against 5.1% a year earlier and 4.5% on average in the period 2010-2012 (see Graph №2). Thus most of the increase of the deficit in the public finances (by 1.8 pp of GDP up to an expected level of 3.6% in 2014, against 1.8% a year earlier) was directed to increasing the capital expenditure. Even more impressive is the fact that this happened on a background of non-fulfillment of the planned growth of the income, which could have been used as a convenient excuse for cuts in capital expenditures and closure of the year with a deficit lower than the 3% benchmark of the Stability and Growth Pact.

The entire economic analysis is available here.

You can watch also the video with Kristofor Pavlov, chief economist of UniCredit Bulbank.

Further information for clients:

UniCredit Bulbank, Call Centre

Phone number: 0700 1 84 84

More information for media:

UniCredit Bulbank, Identity & Communications Department

Ekaterina Ancheva, Phone: + 359 2 9264 963, flbufsjob/bodifwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch