The Ministry of Finance expects the budget balance under the Consolidated Fiscal Programme for 2021 to be negative, amounting to 3 per cent of the forecast GDP
Based on the preliminary data and estimates, the Consolidated Fiscal Programme (CFP) budget balance for 2021 is expected to be negative, amounting to BGN 4.0 billion (3.0% of the forecast GDP); the maximum amount of deficit laid down in the revised estimates under the 2021 State Budget of the Republic of Bulgaria Law is BGN 4.6 billion.
The main driver for the achieved improvement of the deficit is the better performance of revenues; as compared to 2020, the revenues under the Consolidated Fiscal Programme report a nominal growth of around BGN 7.9 billion (17.8 per cent). The overperformance of the revised annual estimates for most of the main taxes and social security and health insurance contributions has made the government to propose and the National Assembly to approve with its decision additional resources to the amount of BGN 1.2 billion at the expense of the overperformance of tax revenues to the state budget to ensure priority measures to support pensioners and to compensate businesses for high electricity and natural gas prices. The already approved measures were thus supplemented by the budget revision from September this year, which ensured resources for measures to combat the pandemic by means of supporting businesses and continuing to support the most vulnerable group of pensioners in the last quarter of the year. Last but not least, the budget revision has led to amendments to the Social Security Code, which introduced a permanent norm wherethrough the pensions of all pensioners were recalculated ex officio by the NSSI, with the percentage for each year of contributory service being changed from 1.2 to 1.35 without conversion in the pension formula, starting from 25 December 2021. From this date, the minimum monthly amount of the contributory-service and retirement-age pension was increased from BGN 300 to BGN 370, which is an increase of over 23 percent. Throughout the year, all other measures to reduce the negative consequences of the pandemic – including measures to support businesses, pensioners and, of course, front-line staff in the fight against the pandemic, to purchase medicines and vaccines, etc. – continued to be carried out under the conditions of the emergency epidemic situation. Significant fiscal incentives, which significantly exceed those reported for 2020, were mobilised for the implementation of all these measures.
Key CFP parameters based on preliminary data and estimates:
For 2021, CFP revenues, grants and donations are expected to amount to BGN 52,2 billion, with the amount planned being BGN 50.6 billion, which is 103.2% performance as compared to the revised annual estimates. Compared to 2020, CFP revenues increase by BGN 7.9 billion, with growth being recorded in terms of both tax revenues and non-tax revenues and proceeds from grants and donations which are mostly EU programme and fund grants. Compared to the revised estimates under the Law Amending and Supplementing the 2021 State Budget of the Republic of Bulgaria Law from September 2021, the overperformance is more than BGN 1.6 billion.
In the part of the revenues to the national budget, the most significant nominal growth compared to the previous year is recorded in the tax revenues and the proceeds from social security and health insurance contributions (BGN 5 billion). Compared to the revised estimates under the 2021 State Budget of the Republic of Bulgaria Law, the plan for the year is exceeded for most of the main taxes as well as for the proceeds from health insurance contributions.
The expenditures under the Consolidated Fiscal Programme, including the contribution of the Republic of Bulgaria to the EU budget, amount to BGN 56.2 billion for 2021, which is 101.8 % of the revised estimates for the year. The excess of the estimates under the 2021 State Budget of the Republic of Bulgaria Law is mainly due to the approved additional expenditures according to Article 26, paragraph 10 of the Public Finance Law, which resulted in additional expenditures and transfers under the state budget, totalling BGN 1.2 billion, at the expense of overperformance of tax revenues.
There is considerable growth of expenditures as compared to the previous year which is related, on the one hand, to the lower base in 2020 when considerably smaller expenditures for fighting the COVID-19 pandemic were reported, while in 2021 those expenditures are considerable and refer to the whole year, and, on the other hand, to the income and social policies and the higher administration costs set in the 2021 State Budget of the Republic of Bulgaria Law.
Looking from the perspective of economic elements, there is a considerable growth in the social security and health insurance expenditures. As to pension expenditures, BGN 1.7 billion were spent on pension allowance for all pensioners (an allowance of BGN 50 for January through September and of BGN 120 for October through December). In addition, pursuant to a decision of the National Assembly approving additional expenditures and transfers under the 2021 state budget at the expense of the overperformance of tax revenues for 2021, the amount of BGN 750 million was provided for the payment of an allowance of BGN 60 to the pension of each pensioner for the first 6 months of 2022. Along with that, pension expenditures are also influenced by the increased amount of the minimum contributory-service and retirement-age pension, of the maximum pension as from the start of the year, the baseline effect of the pension increase in July 2020, as well as the increase in July 2021. Based on preliminary estimates of the Ministry of Finance, due to the above factors pension expenditures report a nominal growth of BGN 3.1 billion compared to 2020.
There is an increase in the health insurance expenditures related to the higher expenses for tackling the pandemic and the arrangements for financing health establishments in the context of the emergency epidemic situation: expenses for medicines, tests, consumables and protective equipment, expenditures supporting front-line staff in the fight against COVID-19 (supplementary monthly remuneration of BGN 1,000), payment to medical staff for vaccination of the population against COVID-19, monthly allowance of BGN 600 for doctors, BGN 360 for nurses and midwives and BGN 120 for hospital attendants, etc.
Significant nominal growth of more than BGN 2.4 billion is also reported in the expenditures for subsidies for non-financial enterprises, which is mainly due to the payments under the programme for compensation of end non-domestic electricity customers, the expenditures of the Electricity System Security Fund, the payments under the 60/40 measure, the 80/20 measure, the Keep Me measure, the Turnover Support for SMEs Affected by the Temporary Anti-Epidemic Measures measure administered by the NRA, etc. In 2021, the programme for compensation of end non-domestic electricity customers (Council of Ministers’ Decisions №739, №771 and №885 and Council of Ministers’ Decree №476) is implemented, as well as the programme for compensation of energy transmission and distribution network operators for the purchase of electricity to cover technology costs (Council of Ministers’ Decree №476); these programmes are expected to continue until March 2022. They may be revised and supplemented. In this regard, the funds ensured for the payment of compensation to businesses and operators due to the electricity price hikes by the end of 2021 total more than BGN 1.3 billion, including BGN 0.45 billion under a decision of the National Assembly approving additional expenditures and transfers under the 2021 state budget at the expense of the overperformance of tax revenues for 2021, for payments in the first quarter of 2022.
Republic of Bulgaria’s contribution to the EU budget in execution of the existing legislation in the area of EU own resources amounts to BGN 1.7 billion.
The statistical data and the Information Bulletin on the Execution of the State Budget and the key Consolidated Fiscal Programme indicators based on the monthly data on cash execution of first-level spending units for 2021 will be published on the website of the Ministry of Finance at the end of January 2022.