Bulgaria passes 2012 budget based on lower growth of 2.3%

(SOFIA) - Bulgaria is heading for sharply less growth than expected next year but will still be in the top group of European Union countries in the growth stakes, the budget for 2012 adopted by parliament on Friday shows.

The budget assumes that the economy will grow by 2.3-percent, down from 2.9 percent expected initially, the finance ministry said.

The budget also plans a public deficit equal to just 1.35 percent of output next year. The government has said it would aim to balance the budget in 2013.

Average inflation is expected to be 3.2 percent next year.

The growth figure was revised between the two readings in parliament, following a similar downward revision of Bulgaria's expected output in EU's autumn economic forecast.

"Nevertheless, Bulgaria will still rank fifth on gross domestic product growth in the EU in 2012," Finance Minister Simeon Djankov said.

The finance ministry had already planned its budget revenues conservatively -- on the basis of economic growth as low as 1.0-1.5 percent -- to counter any unforeseeable shake-ups from the debt crisis in the eurozone, parliamentary budget committee chairwoman Menda Stoyanova said.

Hugely dependent on its slumping exports to the EU, Bulgaria could not loosen its purse strings at the moment, as it faces a repayment of 1.8 billion leva (900 million euros, $1.2 billion) on sovereign bonds maturing in January 2013.

The government would most probably have to issue more debt to finance the payment so the budget law raised the debt ceiling from 16 percent of output in 2011 to 18.7 percent in 2012.

The EU newcomer will still remain one of the least indebted countries in the bloc.

Parliament also approved an increase of the minimum salary from 270 to 290 leva (135 to 145 euros) from May as well as a raise of the retirement age by four months every year from 2012 on until reaching 63 years for the women and 65 years for the men.

Bulgarian women currently retire at 60 and the men at 63.

Bulgaria remains the poorest country in the EU but it managed to withstand the global recession and the current debt crisis in the eurozone without the need of international bailout.

The country owes its relative financial stability to a currency board arrangement it has with the IMF since 1997 that pegged the lev to the German Deutschemark and then to the euro at a fixed rate.