The International Monetary Fund has voiced support for Bulgaria's embattled new government plans to help the poorest and maintain macroeconomic continuity, but said corruption and cronyism are still plaguing the country.

An International Monetary Fund (IMF) mission visited Sofia during June 27–July 3, 2013, to discuss economic developments and government policies with the Bulgarian authorities.

"The new government's intention to maintain macroeconomic policy continuity, to increase protection for the most vulnerable in society, and to address key structural rigidities is welcome," IMF chief in the country Michele Shannon said in a statement at the end of the staff visit.

She called on authorities to slash red tape, improve efficiency in the energy sector and tackle corruption and cronyism.

These moves are "essential to support growth and employment," she added.

The IMF said the political turmoil had so far had a limited impact on the economy but remained a risk factor along with continued euro area uncertainty.

The economy is expected to "improve only slightly" this year compared to last year and unemployment remains unacceptably high, the IMF said.

Stronger exports and European Union funds are providing much-needed support to the economy, while inflation has declined and is expected to remain low, Shannon said.

Commenting on recently announced plans to review the country's budget and increase the budget deficit, the IMF said the planned deficit target of 1.4 percent of output was "achievable."

"However, any revenue shortfalls as a result of weaker-than-budgeted economic activity or delays in the reimbursement of EU funds should be accommodated and not offset by compressing expenditure below budgeted amounts," it added, warning that this will pile up more pressure on an already fragile recovery.

The IMF praised the country's financial system as "stable and well capitalized."

This was Michele Shannon's first visit to the country. She succeeded Ms. Catriona Purfield, whose term expired last year.

At the beginning of April the International Monetary Fund projected that Bulgaria's GDP is to increase by 1.5% in 2013, against an inflation rate of 2.3%.

The Washington-based global lender issued its forecast before the snap elections and the formation of a fragile Socialist-led government, currently facing mass protests and calls for resignation.

Embattled Prime Minister Plamen Oresharski warned last week that Bulgaria’s economy may fail to reach its target of acceleration by 1% at the end of this year.
In his words the previous government has sweetened up estimates about the economy growth.

Bulgaria’s economy grew by slim 0.4% year-on-year in the first quarter and is expected to accelerate by just 1% this year mainly due to recession in the euro zone, its key trading partner.

Oresharski’s government has pledged to stick to small fiscal deficits, avoid raising new debt and keep flat income and corporate tax rates at 10%.

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