EU funds to boost Bulgarian GDP by 1.7% in 2017 – finance ministry

Bulgaria will receive a total of EUR9.9bn funds in the 2014-2020 period, up by 5.2% from the previous 2007-2013 programme period, according to the latest finance ministry’s report on the effect of EU funds on the Bulgarian economy. So far, the government has achieved an agreement for the payments of 40.1% of the total sum. The EU fund payments reached EUR1.2bn by end-June, indicating that the EU funds absorption for most of the projects is still at a beginning stage, the ministry commented. The EU funds will boost Bulgaria’s GDP by 1.7% in 2017 compared to the scenario of GDP growth without EU funds absorption. The positive EU funds’ role in the mid-term is also related to the higher number and improving quality of hired resources (labour force and capital), thus boosting labour productivity, the Finance Ministry said. A positive impact is also observed in rising private investments by 6.5% for 2017 compared to the scenario without EU funds.

The ministry estimated that the EU funds boosted imports by 3.3% compared to the baseline scenario, which is explained with both higher income growth and accelerating production activity in the country, requiring higher imports of necessary resources. As a result, the current account will deteriorate by 1.4pps of GDP, but in the mid-term the effect should wane, according to the ministry report.

The positive EU funds’ effect on the 2017 budget balance is estimated at 0.2pps of GDP. The Finance Ministry explained that the EU fund absorption impact on the fiscal consolidation is two-sided. On the one hand, the EU programs’ implementation boosts government’s expenditures directly. On the other hand, the positive labor market and overall economic developments are reflected in higher tax revenues for the budget.

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