The government of Bulgaria, the European Union's poorest member, forecast annual growth of 6% for the next three years, as the government presses to raise living standards to EU levels.
The forecasts were part of the government's three-year economic reform plan released by Finance Minister Plamen Oresharski in Sofia today. The plan also envisages budget surpluses of between 1% and 1.5% of GDP through 2009. „Our top priority is to stimulate economic growth and create new jobs,” Oresharski said. Promoting economic growth in the country, which joined the EU on January 1 and has a per capita income that is a third of the bloc's average, has been a key government priority. Powered by exports, a lending boom, low taxes and foreign investment, the economy grew 6.7% in the Q3 of 2006 and 5.5% in 2005. The government economic plan also forecasts employment to rise to 61% from the current 56%. The government posted a budget surplus of 3.5% of GDP in 2006, the fourth surplus in a row and will use part of the money to repay debts to the International Monetary Fund and the World Bank. The government plans to keep its currency pegged to the euro until the country joins the euro zone in several years, according to the plan. The document does not contain a date for euro adoption.
Bulgaria wants to join the exchange-rate mechanism, the precursor to adopting the euro, „in the shortest term possible,” according to a convergence program the Finance Ministry sent to the European Commission in January. To adopt the euro, Bulgaria must maintain a budget deficit that is below 3% of GDP. Reducing inflation, which was 6.5% in 2006, will be Bulgaria's most difficult task in meeting the euro-adoption criteria. The Finance Ministry convergence program envisages budget surpluses of between 0.8% and 2% of GDP between 2007 and 2009 and inflation of 3.4% in 2007, 3% in 2008 and 2.9% in 2009. Estonia and Lithuania, two former Soviet republics, joined the exchange-rate mechanism a month after they entered the EU in 2004, with the intention of being part of the euro zone at the end of 2006. Their plans were foiled after economic growth, among the fastest in the EU, fueled inflation. (Bloomberg)