Bulgaria with Second Lowest Debt-to-GDP Ratio in EU in Q1, 2014

Business » FINANCE | July 22, 2014, Tuesday // 15:26| Views: 1212 | Comments: 13
  • Send to Kindle
Bulgaria: Bulgaria with Second Lowest Debt-to-GDP Ratio in EU in Q1, 2014 Photo by bnr.bg

At the end of the first quarter of 2014, Bulgaria's government debt increased by 1.4 percentage points from the last quarter of 2013 and by 2.3 pp from the first quarter of 2013, to 20.3% of the GDP, according to Eurostat.

In the last quarter of 2013 the government debt amounted to 18.9% of the GDP and in the first quarter of 2013 it stood at 18.0% of the GDP.

At the end of the first quarter of 2014, the government debt to GDP ratio in the euro area (EA18) stood at 93.9%, compared with 92.7% at the end of the fourth quarter of 2013. This increase comes after two consecutive quarters of decrease.

In the EU28, the ratio increased from 87.2% to 88.0%. Compared with the first quarter of 2013, the government debt to GDP ratio rose in both the euro area (from 92.5% to 93.9%) and the EU28 (from 86.2% to 88.0%).

The highest ratios of government debt to GDP at the end of the first quarter of 2014 were recorded in Greece (174.1%), Italy (135.6%) and Portugal (132.9%), and the lowest in Estonia (10.0%), Bulgaria (20.3%) and Luxembourg (22.8%).

Compared with the fourth quarter of 2013, nineteen Member States registered an increase in their debt to GDP ratio at the end of the first quarter of 2014, six a decrease and Estonia no change. The highest increases in the ratio were recorded in Slovenia (+7.0 percentage points – pp), Hungary (+5.0 pp), Belgium and Portugal (both +3.9 pp). The highest decreases were recorded in Poland (-7.6 pp), Germany (-1.1 pp) and Greece (-1.0 pp).

Compared with the first quarter of 2013, sixteen Member States registered an increase in their debt to GDP ratio at the end of the first quarter of 2014, and ten a decrease. The highest increases in the ratio were recorded in Cyprus (+24.6 pp), Slovenia (+23.9 pp), Greece (+13.5 pp) and Croatia5 (+9.9 pp), while the largest decreases were recorded in Poland (-7.7 pp), Germany (-3.2 pp), the Czech Republic (-2.2 pp), Latvia (-1.4 pp) and Belgium (-0.9 pp).

Finance » Be a reporter: Write and send your article
Tags: eurostat, government debt, Euro Area, EU member states, debt-to-GDP ratio
Expats.bg All Are Welcome! Join Now!

Leave a comment


» To the forumComments (13)
#13
George Zheliazkov - 25 Jul 2014 // 15:58:34

Rusophobe, (I wouldn’t even attempt commenting on the Warfou…)

So yes, BALANCE and the fine part of it is the key in life.
Excessive debt levels are bad; no debt is also bad and etc.

Bulgaria from where it stands in Debt to GDP ratio can and should borrow and invest into job creation, economy stimulation and prosperity creation.
The country needs a lot of work and there is absolutely no time to be wasted bragging how low the debt to GDP ratio is!

Anyways I think they are getting the point and starting to do it.

#12
Warfou2 - 25 Jul 2014 // 01:34:05

Poland debt to GDP 57%, Czech Republic 46%
Look at the graph:
www tradingeconomics.com/poland/government-debt-to-gdp
www tradingeconomics.com/czech-republic/government-debt-to-gdp

Look at the one from Bulgaria:
www tradingeconomics.com/bulgaria/government-debt-to-gdp


See the difference?
No wonder Poland and Czech Republic are doing far better last years... They upped their debt (and the living standard of their citizens)

Also notice the effect of Djankov who came into office in 2009, the effect of his austerity measures.
See, that's the wrong way of collecting debt. Debt must have an added value and then it doesn't really matter much that your debt/GDP ration goes up, as long as you keep it under control. But when it is going up because someone is shutting all money inflow to the economy down then you have a problem.
Chobanov and Oresharski tried to deal with that problem and in my opinion did they a fairly good job on that, because getting things on the rails is a lot more difficult then getting it off the rails.

#11
Warfou2 - 25 Jul 2014 // 01:22:16

Tinuz, the problem is not that the lev is overvalued the problem is that there is no investment in Bulgaria. Things aren't working like it should.

In other countries they pile up massive debts (most of them way to much) but make sure their infrastructure is working perfect and most of them give massive tax discounts and grants to really big companies.
In Bulgaria because of the lack of money everything dies.

And a devaluation of the lev would only make problems worse.
There is an absolute need for debt that goes into investments that make it possible for the economy to smoothly work in an effective way.
And rules, filling in 10 documents, putting 20 signatures (because of the strict rules) to get pc banking is just not helping and most things are like that. Too strict. Every few months a small company must defend its VAT in office while in other countries this most of the time is every few years (very small companies).

And contrary to you I believe the ministry of finance is managed very well. And your example of the state railways doesn't make much sense because they need to be included and Europe has made a lot of audits around such cases last year. And believe me, the first country they would take on is Bulgaria.
Around this time many countries need to start including those debts so the average debt of European countries will rise a couple % more.

Austerity, that was pushed to the end by Djankov which resulted in people setting themselves on fire, was the worst decision Bulgaria could take. Every country in the EU has suffered from that EU pressure with the difference that Bulgaria didn't have a debt problem, didn't have a problem with spending too much and didn't have a problem with banks.

Sorry I made a mistake, taking an IMF loan would be the biggest mistake.

#10
TinuzH - 25 Jul 2014 // 00:01:44

Warfou please explain because you are not making much sense to me.This is not about the Eu - which I think is an overrated and overstated talking shop - but about economics in BG. Maybe I'm just stupid but I think by pegging the lev to the euro BG has had an overvalued currency for decades thereby making BG un-competitive and hampering BG's exporting the few things they're good at producing. Now letting go of the currencyboard is a scary decision.It is always more easy to let someone else do your dirty work. Does BG trust it's political, judiciary, and independent media class enough to try it? No, they don't and with good reason. Therefore what would economically have made sense in any other "grown-up or economically powerful country" for BG did not happen. It did not enhance ordinary peoples lives, sadly. But it did bring some form of stability. And to be truthful I'd scared to look behind the sofa's at the finance ministry. One good audit and that deficit might be bigger than anyone thought. For example the privatised but 100% state owned railways. Since they are privatised no need to put them on the governments balance sheet, but who ends up paying? Yes the taxpayer.

#9
Warfou2 - 24 Jul 2014 // 23:04:17

Debt is debt, and in the capitalist system it is essential for functioning.
It's also dealy in a wrong combination/proportion. Which means too little debt compared to your neighbours is also deadly.

Take a look around and you know what I mean.

#8
Warfou - 24 Jul 2014 // 22:45:50

Bulgaria is not sentenced to import the eurozone's inflation and overdebtness, as the lev can be (and in my opinion should be) de-pegged from the Euro. Some other countries in CE, such as Poland and Czech Republic use floating rate with good effect and are not being bombed by Brussels or Berlin for that. But, again, it is a different topic than the state debt which should be as low as possible. I will repeat it once more (exactly as the peasants to their donkeys): government is not a business entity, it is oriented on different goals than making profit, so it is not a good borrower. Where the state is considered the best borrower, a moon economy emerges.

#7
Warfou2 - 24 Jul 2014 // 19:10:24

Not a single business functions without debt, not a single country will function without debt.

There are a couple of things that make the debt dangerous or usefull:
- the total amount (compared to GDP)
- the use of the debt, is it used to dump black holes or is it used to invest
and plenty more.

The average debt of all EU debt is 90% to GDP.
That is 4,5 times bigger then Bulgaria.
You can never compete with such a difference. Never. And since the lev is tied to the euro the debt of those other countries have direct influence on the Bulgarians who hardly have any debt...

In history when high state debts occur the solution is always to inflate the currency. That way your debt loses value and it will be easier to pay them off because more taxes come in. People pay this, the inflation will direct go out of their pockets.
So in fact, poor Bulgarians who try to have no debt will pay for the debts of all those other countries by inflation.
And they get nothing in return while those indebted countries have spent all that money. New roads, higher wages and pensions, etc.
Pensioners in Bulgaria with a 150 leva pension will pay the price for pensioners in the West receiving 2000 leva or more.

If you don't understand that, ... Why comment?

If Bulgaria stays in the EU and keeps the tie with the euro they need to grow their debt to 50% so it still will be in control but they can invest large amounts of money in the country.
Only, the EU will never allow them.

That is why Bulgaria goes backward. The EU is sucking the last life out of it.

If you don't understand that... Go and talk to a donkey.

#6
Russophobe - 24 Jul 2014 // 17:55:47

George,

You make absolutely no sense. On many of your previous comments you strongly criticize Europe and the US and ridicule them for being excessively in debt and "their unsustainable debt levels will eventually crush them." Now you say debt is good.

China's debt to GDP ratio at 250% of GDP will soon surpass the US while growth there is slowing given that it is becoming more and more of an emerged market. Most analysts think this level of exploding debt in China is unsustainable and could bring about a major international financial crisis.

http://www.cnbc.com/id/101854344

So what is it George? Debt is good or bad? Or better phrased, what side of the bed did you wake up from today?

#5
George Zheliazkov - 24 Jul 2014 // 17:45:30

Watfou,

It’s even useless to comment. You need money to make money. Money is a tool and an instrument needed for every single enterprise and business/economic endeavor. Money and the availability of it is the lifeblood of the economy. Loans must be repaid but profits also must be made!
Here some examples,

http://www.bnn.ca/News/2014/7/16/Chinas-expansion-accelerates-after-government-stimulus-.aspx

http://www.rttnews.com/2355063/s-korea-announces-11-4-bln-stimulus-package-as-economic-growth-eases.aspx?google_editors_picks=true

http://thediplomat.com/2014/07/south-korea-considers-a-japanese-style-stimulus/

http://www.foreignaffairs.com/articles/140335/marcus-noland/six-markets-to-watch-south-korea

and etc….

#4
Warfou - 24 Jul 2014 // 11:12:55

The topic is neither on football nor debts in general but on incurring STATE debts. It's no doubts that the top football clubs are profitable business entities thus being capable of repaying their debts. But the governments are not, and countries such as Italy, Portugal, Greece have debts they can't handle. Germany started to repay its state debts, the other should follow, but they can't because of being unable to devaluate their currencies to regain profitability. There are of course other methods of regaining it but they are more difficult and associated with a risk of social unrests. It is a vicious circle of some sort. The best thing is not to incur debts by the government sector. I hope Bulgaria won't follow those examples. It will pay in a future.

#3
Warfou2 - 24 Jul 2014 // 01:42:54

Please,... Compare to football.
If Madrid and Barcelona couldn't have high debts they even didn't came close to top 10 in Europe.
But if you look at it from the business side this are very well managed clubs and very big business, healthy business.

Now Levski Sofia has small debt but you can see the result your self if you want, buy a ticket and go watch.

If you really are not smarter then to freak out when you hear the word debt then it might be advisable to skip the discussion when people are talking about finances...
:o

#2
Warfou - 24 Jul 2014 // 00:29:03

Sorry for being so direct but what you say sounds like a moon economy. When you incur a loan, you have to repay it. But if you incur it only to create jobs which do not produce any profit (government sector!), and this is what most countries of the South do, you are on the path to bankruptcy. You can only avoid or postpone it if you have a national currency which every other country respects and accepts in exchange for their products and resources (like the US). So, unless you don't have such a national currency like the USD, it is good for you not to have government debts. Bulgaria seems to keep this healthy common sense of economy which the richer nations forgot - to survive the winter you first need to have your barn filled on your own and not be counting on neighbours.

#1
George Zheliazkov - 23 Jul 2014 // 23:25:21

There is absolutely nothing heroic having a low debt to GDP ratio!
Go borrow some money and stimulate the economy!
Create jobs and prosperity!