Bulgaria in the EU: The Current Economic State and Short-Term Outlook

The confidence crash in the major financial institutions, the disastrous consequences of the discretionary monetary policies of the BNB, as well as the dramatic depreciation of the national currency created the preconditions for the search and the enforcement of a radical solution – namely, the adoption of the currency board arrangement (CBA). The outcome of CBA is connected with the appreciation in the real effective exchange rate. The only economic adjustment implies that the production should look for ways to keep and increase its competitiveness mainly along the line of higher efficiency and better quality. Bulgaria’s current account has been negative for almost all the period since 1990 (more than 11% in 2005). The good news is that the international foreign exchange reserves of the country have been steadily going up. Bulgaria has managed to keep remarkable budget discipline after the adoption of the CBA. Recently, in search of incentives for economic growth there were some experiments with various tax structures. In the conditions of Bulgarian economy the importance of the institutional factors for social and economic progress outweighs the others. The macroeconomic forecasts provide conditional projections – as a consequence from adopting one or another line of macroeconomic policy, or a given exogenous influence (for instance the dynamics of the domestic energy prices, of the major foreign exchange rates etc.), i.e. they study problems of the type “what – if”. The employed simulation model is used within the framework of the LINK project.