Bulgaria’s economy is expected to grow by 2.1% real next year, an increase compared to 2.0% projected for 2015, the Finance Ministry said on Monday.

Consolidated budget deficit equivalent to 2.0% of Gross Domestic Product (GDP) is projected for next year in a 2016 budget draft and an updated budget forecast for the period 2016-2018 published on the Finance Ministry website.

The deficit projection for next year has been lowered from 2.5% of GDP projected in the spring forecast of the Finance Ministry.

Economic growth is expected to accelerate to 2.5% real in 2017 and 2.7% in 2018.

Budget deficit is projected to continue falling, reaching 1.4% of GDP for 2017 and 1.0% for 2018. The Finance Ministry said that the projected rate of decrease of about 0.5% a year for the period 2016-2018 reflects its policy of gradual fiscal consolidation.

Maintaining the stability of public finances is a top priority of the government’s fiscal policy – a goal which is reflected in the 2016 budget draft and the medium-term fiscal projections. Macroeconomic forecasts have been positively revised to reflect better-than-expected performance in 2015 and beneficial trends expected over the next three years, the Finance Ministry said.

Consolidated budget revenue is projected at 37.4%-37.1% of GDP for the period 2016-2018. Budget expenditure is forecast to decrease, from 39.4% of GDP next year to 38.2% in 2018. Investment in human capital will be a top priority of budget expenditure in the medium term, to be achieved mainly through targeted measures in high-school education and investment in infrastructure, according to the draft.

Based on the assumptions of economic growth and budget revenue and spending as well as projected net debt financing for the period 2016-2018, government debt-to-GDP ratio is expected to reach about 28.9% at the end of the three-year period. Debt-to-GDP ratio was 28.4% at the end of August 2015. Bulgaria’s government debt-to-GDP ratio was 27.1% at the end of December last year,  an increase compared with 17.9% at end-December 2013.

The need to refinance outstanding debt, financing of budget deficits and maintaining the level of fiscal reserves as a counter-cyclical mechanism to meet current liquidity imbalances is the main reason for the projected increase in public debt, the Finance Ministry said.