site.btaWithout Reforms, Bulgaria's Debt-to-GDP Ratio Will Triple by 2045, World Bank Warns

Assuming that current demographic tendencies in Bulgaria persist and public finances are not reformed, the ratio of the national debt to GDP will triple by 2045, surpassing the 60% mark, and will reach almost 80% by 2050. This compares with 21% at present, which is the EU's second-lowest debt-to-GDP ratio after that of Estonia. The forecast is made in a World Bank review of public finances in Bulgaria between 2016 and 2022, World Bank Sofia Office senior economist Desislava Nikolova said on Thursday.

According to the report, the lack of reforms will slow the nation's economic growth to 1.25% annually, which will not be enough for the country to catch up with the standard of living in EU medium- and high-income economies.

Nikolova said: "Bulgaria's solid fiscal position made the worsening of the fiscal situation less dramatic and kept it from producing harmful consequences for the economy. Support for the private sector continued in 2022 and 2023, as a result of which Bulgaria now shows the second-highest fiscal rigidity in the region of Southeastern Europe."

To mitigate harmful impacts, the government needs to promote VAT compliance. Nikolova identified five sectors in which the risk of VAT evasion is relatively high: agriculture, the extractive industries and the production of electricity, the manufacturing industries, construction, and trade.

A suitable policy of increasing excise duty on cigarettes and alcohol can boost public revenues and can benefit public health as tobacco and alcohol sales drop, according to the expert.

Deputy Finance Minister Georgi Klissurski, who attended the presentation of the World Bank review, said that efforts are being made to reform the pension system and reverse demographic tendencies. Klissurski stressed the robust current condition of public finances.