The pandemic risks interrupting impressive income convergence and raises the urgency of making growth more inclusive. Addressing long-standing patchy coverage of social benefits and improving provision and efficiency of education and training should become top policy priorities in the recovery.
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2021 Structural Reform Priorities
The first COVID-19 outbreak was smaller in Bulgaria than in many countries and the economy less severely impacted by confinement measures than expected in the first half of 2020. An economic contraction of 4.1% is expected in 2020 to be followed by a recovery, with growth of 3.3% in 2021 and 3.7% in 2022, driven by rising domestic demand and a moderate rebound in exports. Fiscal support for households and firms and high public investment are central to the strength of the recovery. Private investment will remain subdued given substantial uncertainty.
Low public debt and high fiscal reserves, together with EU financial resources, will allow the government to sustain and expand its fiscal assistance. The government’s wage subsidy scheme will keep unemployment down, and rises in public wages and social benefits in 2021 will provide a boost to household incomes. With effective planning and implementation, the large EU-funded public investment programme has the ability to increase potential growth. Reforms to ease access to insolvency and firm rehabilitation proceedings have taken on an added urgency.