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Bulgaria’s Fiscal Sustainability and Policy Response to the COVID-19 Outbreak

Author

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  • Iana Paliova

    (Economic Research Institute, Bulgarian Academy of Sciences)

Abstract
The analysis of the present study on the effects of the fiscal policy response of Bulgaria to the COVID-19 outbreak illustrates that the European Union (EU) additional fiscal rules introduced after the 2008 global economic and financial crisis help build buffers for the period of a new sudden macroeconomic shock. The new legislative initiatives to reform the coordination, monitoring and macroeconomic risk management in the EU taught lessons about fiscal framework from Maastricht, which inevitably has had an impact on national fiscal policies of the EU member states before COVID-19 pandemic. The assessment of Bulgaria’s fiscal sustainability indicates that the government followed a strong fiscal discipline since early 2000s, which helped the country during both recent crises. Prior to the EU accession Bulgaria experienced strong economic growth above its potential provoked by the attractiveness of the country to foreign investors. The fiscal policy has been countercyclical, which contributed to the macroeconomic stability of Bulgaria as a country in the currency board arrangements. During the good periods when the output gap was positive the government created stable buffers with positive structural fiscal balance, which was above the medium-term budgetary objective (MTO) of 1% of GDP. Thus, in the emergency COVID-19 epidemic situation Bulgaria has had fiscal space for additional public spending and debt issuance. The assessment of the study shows that Bulgaria should return to its MTO with a gradual fiscal consolidation over the following years.

Suggested Citation

  • Iana Paliova, 2021. "Bulgaria’s Fiscal Sustainability and Policy Response to the COVID-19 Outbreak," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 9(1), pages 31-38, June.
    • Handle: RePEc:ntu:ntugeo:vol9-iss1-31-38
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    References listed on IDEAS

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    Cited by:

    1. Julia Dobreva, 2022. "Income Inequality In Africa - Current Issues And Perspectives," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 154-162.

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    More about this item

    Keywords

    Fiscal policy; Public Economics; Public Finance.;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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