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Bulgaria expects fiscal deficit of 1% of GDP for 2022

Woman shops for food items at Krasno Selo market in Sofia

SOFIA (Reuters) - Bulgaria expects to end 2022 with a fiscal deficit of 1.5 billion levs ($821.11 million), equal to 1.0% of economic output, outperforming a revised target of 3.4%, the finance ministry said.

Better than expected tax collection, increased payments by state energy producers and weaker capital spending have helped the Balkan country to lower its fiscal shortfall this year from the 3.0% it registered in 2021.

Bulgaria, rattled by political instability, has decided to extend its 2022 budget into the new year until a new government is formed and comes up its own fiscal plans for 2023.

The interim government has warned that increased state pensions and other social spending in the second half of 2022 amid a looming economic slowdown meant the fiscal shortfall will balloon to over 6.6% of economic output in 2023.

Weaker investment and delays in tapping European Union funds have lowered the fiscal deficit for 2022, but that spending would be transferred into 2023, increasing pressure on the budget next year, the finance ministry said in a statement.

In the first 11 months of 2022, the country registered a fiscal shortfall of 398 million levs, or 0.2% of economic output for the year, the ministry said late on Friday. Bulgaria often loads its state spending toward the end of the year.

The finance ministry forecast government revenues, supported by high inflation, to have increased to 64.7 billion levs at the end of December from 52.3 billion levs a year ago, mainly because of increased payments from energy producers.

It forecast expenditures to have jumped to 62.9 billion levs from 54.6 billion levs a year ago, mainly due to compensation paid to businesses to shield them from surging energy costs and increases in some state salaries and pensions.

Fiscal reserves, held under a currency regime that pegs the lev to the euro, were 12.8 billion levs by the end of November, data showed.

($1 = 1.8268 leva)

(Reporting by Tsvetelia Tsolova; Editing by Kim Coghill)