Title: BULGARIAN ECONOMY ON THE ROAD TO EUROPEAN UNION AND ECONOMIC AND MONETARY UNION
1BULGARIAN ECONOMY ON THE ROAD TO EUROPEAN UNION
AND ECONOMIC AND MONETARY UNION
- IVAN ISKROV
- GOVERNOR
- BULGARIAN NATIONAL BANK
- 14 July 2006
- Athens
2OUTLINE
- INITIAL CONDITIONS AND TRANSITION PROCESS
- MACROECONOMIC AND FINANCIAL FRAMEWORK
- ECONOMIC DEVELOPMENTS AND POLICY CHALLENGES
- EU AND EMU PERSPECTIVES
- REGIONAL PERSPECTIVES
3INITIAL CONDITIONS AND TRANSITION PROCESS
- Planning economy with lack of functioning markets
- Bulgarian economy was highly integrated within
Council for Mutual Economic Assistance - Economy was not subject to competitive pressure
- Distorted incentives
- Transition was a unique process without
historical experience to draw from - Political consensus on societys priorities was a
key prerequisite for successful transition
4MACROECONOMIC AND FINANCIAL FRAMEWORK
- Euro-based currency board since mid 1997
- Prudent and predictable fiscal policy oriented
towards balanced budget or surplus - Withdrawal of the state from the business through
large scale privatization of the state owned
enterprises - Liberalization of the markets free movement of
goods, services and capital - Government policy oriented towards improvement of
investment climate
5GENERAL GOVERNMENT BALANCE
Maastricht criterion
6GOVERNMENT DEBT
Maastricht criterion
7BULGARIAN SOVEREIGN SPREAD
8REAL GDP GROWTH
9FOREIGN DIRECT INVESTMENTS IN BULGARIA
10REAL GROWTH OF GROSS FIXED CAPITAL FORMATION
11SHARE OF THE GROSS CAPITAL FORMATION IN GDP
12GROWTH OF THE REAL GDP PER PERSON EMPLOYED
13GROWTH OF THE UNIT LABOUR COSTS
14EMPLOYMENT GROWTH
15UNEMPLOYMENT RATE
16ECONOMIC DEVELOPMENTS AND POLICY CHALLENGES
- High consumption and investment growth
- Dynamic credit growth
- External imbalances
- Limited scope for policy reaction of the central
bank - Limits of conservative fiscal policy
17REAL GROWTH OF CONSUMPTION
18SAVINGS AND INVESTMENTS BALANCE
19EXTERNAL POSITION
20CREDIT TO THE PRIVATE SECTOR
21GROWTH RATE OF THE CREDIT TO THE PRIVATE SECTOR
22EU AND EMU PERSPECTIVES
- BNB and Government signed in 2004 an agreement
that defines the strategy for Euro adoption - Joining Exchange Rate Mechanism II immediately
after EU membership - Maintaining unilaterally currency board at the
current exchange rate BGN 1.95583/EUR 1 - Bulgarian economy is in good position to fulfill
Maastricht criteria - Inflation criterion is a challenge
23LONG-TERM INTEREST RATES
Maastricht criterion
24AVERAGE INFLATION
25REGIONAL PERSPECTIVES
- Greek business and politicians extended
consistent support to economic and political
reforms in Bulgaria - Greek economy has very strong ties with Bulgarian
economy through trade of goods and services and
direct investments - The accession of Bulgaria and Romania in EU opens
economic opportunities for the Balkans that our
region have never had in its history
26GEOGRAPHICAL STRUCTURE OF FOREIGN TRADE (2005)
All
EU
27GEOGRAPHICAL STRUCTURE OF THE EUs FDI IN
BULGARIA
All
EU