October 30, 2017 / 10:39 AM / a year ago

UPDATE 1-Bulgaria plans small deficit to spend more on education, wages

SOFIA, Oct 30 (Reuters) - Bulgaria’s centre-right government approved on Monday a 2018 draft budget with a fiscal shortfall of 1.0 percent of economic output, earmarking more funds for education and wages as the economy expands.

The European Union country is expected to end this year with a balanced budget after initially targeting a 1.4 percent deficit mainly due to stronger-than-expected economic growth.

Strong domestic demand and exports are expected to accelerate the small and open economy to 4 percent this year and 3.9 percent every year through to 2020.

The finance package plans more funds to back education and raise teachers’ salaries by 15 percent to fight an acute demographic crisis, improve illiteracy levels and preparing a better skilled workforce in the Balkan country.

The bill also plans to increase the salaries of army and police officers as well as some state-run social agencies, but trade unions said pay raises are selective and marched through Sofia last week to demand better pay for everyone.

“This is a good budget,” Finance Minister Vladislav Goranov said. “The fiscal package is optimal. The salaries are increasing fastest in the sectors where we have seen the biggest problems,” he said.

The minimum monthly salary will also raise by 11 percent to 510 levs from next year, and funding for security agencies and healthcare will be boosted. Tax rates will be kept unchanged.

Economic analysts expressed concerns that the increased spending without clear reform drive may not result in sustainable improvement of the public sector.

“More money for education, health and security does not equal better education, health and security,” Georgi Ganev with Sofia-based Centre for Liberal Strategies said.

Under the draft, Bulgaria, one of the EU’s least indebted member states, will refrain from tapping global markets for a second year in a row and sees its public debt decreasing to 22.3 percent of GDP in 2018.

The bill will now be sent to parliament for debate and final approval. The bill is expected to easily pass the assembly next month. (Reporting by Angel Krasimirov and Tsvetelia Tsolova, editing by Ed Osmond)

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