It is necessary to urgently discipline the budget both as a process and as a content . Next year's budget will be an indicator of whether we are moving in the right direction. This was said by the Governor of the Bulgarian National Bank (BNB) and Manager for Bulgaria at the International Monetary Fund (IMF), Dimitar Radev, in an interview with BTA in Washington, where he participated in the annual meetings of the World Bank and the IMF.
Full interview:
- In its latest review of the world economy, the IMF lowered its forecast for the growth of the Bulgarian economy to 2.3 percent, while in the spring it predicted a growth of 2.7 percent. What are your expectations?
- There is no qualitative difference between the new IMF forecast for the growth of the Bulgarian economy in 2024 and the BNB forecast published earlier this year. Against the backdrop of internal and external challenges, growth above 2 percent of GDP can be seen as a relatively positive development.
- What can be done, what are the options before the BNB, if the economy slows down more than expected?
- Loans for businesses and households are a key factor in maintaining economic activity in positive territory. What the BNB is doing is to calibrate its measures in such a way as to achieve the objectives of its macroprudential policy without stagnating credit and thus economic activity.
- During your talks in Washington within the framework of the annual meetings of the IMF and the World Bank, do you receive support from your colleagues regarding Bulgaria's accession to the Eurozone?
- Bulgaria is the only country that is a member of the European Banking Union without being a member of the Eurozone. In this context, support in banking circles remains strong and constructive.
- When do you think that Bulgaria will meet the inflation criterion, which is defined as the only one that our country does not cover in order to enter the Eurozone?
- The answer must be sought along the lines of conducting a reasonable macroeconomic policy with emphasis on: urgent discipline of the fiscal position and harmonization of the monetary and fiscal conditions in the country. In any case, we are talking about a very short horizon and a window of opportunity that should not be missed.
- We are in a period in which the state budget for the next year is to be presented. Do you see any risks in this direction that could affect the process of joining the Eurozone?
- That's exactly what I'm talking about – urgent discipline of the budget both in process and content. Next year's budget will be an indicator of whether we are going in the right direction.
- Do you think there are risks to the economy, as predicted by some rating agencies, which could materialize if the adoption of the euro as a national currency is postponed?
- The risk that the credit agencies explicitly emphasize is the lowering of the country's credit rating and deterioration of the financing conditions of our economy. With a loose budget with chronic deficits, these are billions that businesses and households will eventually have to pay.
- From the beginning of October, mandatory limits for mortgage lending indicators set by the BNB came into force for banks. Do you expect the new criteria to make it more difficult to grant new mortgage loans and are you already considering their effects on the property market?
- The purpose of these measures is not to make credit more difficult, which, as I indicated at the beginning, is an important factor for economic activity in the country, but to create a reliable framework for supervision and management of potential risks in the banking system. With these latest measures, we have effectively activated the full range of macroprudential tools available to a central bank.
- What is the general expectation that you felt during the meetings, for the development of the global economy and in particular that of the Eurozone and the EU?
- Two trends stand out, one positive and one negative. The positive is the reduction in inflation, the negative is the continued lack of fiscal discipline that increases the debt burden. These trends have clear projections in our country as well.