- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
Economic policy needs new stimulus
submited on 29.06.2007 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 29.06.2007 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
Research has shown that the human mind easily recognizes odd or unnecessary things rather than missing (but necessary) things in a given environment or situation. For instance, when there is a letter on a sheet of paper with digits, the human mind notices quicker this, rather than the missing digit from 0 to 9 on the same sheet.
Due to this psychological mechanism, as well as the lack of imagination in the Bulgarian economic policy the attention is shifted from the missing and needed things to the (formally) unnecessary. The focus is now more often on any of the following:
- the current account deficit
- banking credit expansion
- economy’s overheating.
the lack of market reforms in many important spheres is left outside the debate’s agenda. As if politicians and analysts forgot the sources of the current relatively good dynamics of the Bulgarian economy. These were namely pro-market reforms such as the large-scale privatization, deregulation of most prices, the currency board, fiscal discipline, tax rates reduction and so on.
Now the moment is suitable for a new beginning dedicated to market reforms in the important spheres. The expressed dissatisfaction by employees in the educational and health sector must be the pivotal point for such reforms. The government crisis could also give a good reason for such thoughts. The governing coalition needs new optimism and ideas for the economic policy’s future.
There are reforms that are easy, and reforms that are not. Among the easy ones is the larger reduction of the tax and insurance rates. Fiscal realities allow this to happen. Taxes on labor remain too high for some employers, who continue to hide income and employment or they just do not generate employment.
Among the difficult reforms is the privatization of educational and medical services. The relatively well-organized syndicates, but contradicting economic logic, are a heavy barrier on the way of reforms. These are challenges of the type “once in life”.
The reform of pension industry must not be left outside politicians’ agenda. Latest demographic and budget developments are favorable. The transition towards a capital-financed, private and competitive pension system may turn out to be easier than preliminary forecasts.
Statistics gives politicians calming signals. After all, what is missing in an economy, growing at 6 % annually, investments increasing at 22% rates, and at the same time private sector created 200 thousand working places.
There are several scenarios for development of a given economy and it is important to know that development does not happen by itself, i.e. it is not independent from players’ decisions. When analyzing Bulgaria, there are several possibilities for the near and more distant future. In one of the versions the country will provide reliable investment environment (including through a reform of the judicial system), and in the other – the country will continue to develop at moderate rates, and for a few generations ahead will have the last place (regarding income) in Europe guaranteed.
Economic reforms are not over yet. There are a few positive signals coming from the political sphere. Leading parties have been more open towards economists’ opinion. Now there is a better chance for providing fresh ideas to the current and following governments. The European commission would not manage this task. Maybe it will have even smaller success than the IMF and the World Bank, which in recent years literally failed in their attempts to induce market reforms in Bulgaria. The next stimulus for reforms will either come from inside the country, or there will not be any at all.
Due to this psychological mechanism, as well as the lack of imagination in the Bulgarian economic policy the attention is shifted from the missing and needed things to the (formally) unnecessary. The focus is now more often on any of the following:
- the current account deficit
- banking credit expansion
- economy’s overheating.
the lack of market reforms in many important spheres is left outside the debate’s agenda. As if politicians and analysts forgot the sources of the current relatively good dynamics of the Bulgarian economy. These were namely pro-market reforms such as the large-scale privatization, deregulation of most prices, the currency board, fiscal discipline, tax rates reduction and so on.
Now the moment is suitable for a new beginning dedicated to market reforms in the important spheres. The expressed dissatisfaction by employees in the educational and health sector must be the pivotal point for such reforms. The government crisis could also give a good reason for such thoughts. The governing coalition needs new optimism and ideas for the economic policy’s future.
There are reforms that are easy, and reforms that are not. Among the easy ones is the larger reduction of the tax and insurance rates. Fiscal realities allow this to happen. Taxes on labor remain too high for some employers, who continue to hide income and employment or they just do not generate employment.
Among the difficult reforms is the privatization of educational and medical services. The relatively well-organized syndicates, but contradicting economic logic, are a heavy barrier on the way of reforms. These are challenges of the type “once in life”.
The reform of pension industry must not be left outside politicians’ agenda. Latest demographic and budget developments are favorable. The transition towards a capital-financed, private and competitive pension system may turn out to be easier than preliminary forecasts.
Statistics gives politicians calming signals. After all, what is missing in an economy, growing at 6 % annually, investments increasing at 22% rates, and at the same time private sector created 200 thousand working places.
There are several scenarios for development of a given economy and it is important to know that development does not happen by itself, i.e. it is not independent from players’ decisions. When analyzing Bulgaria, there are several possibilities for the near and more distant future. In one of the versions the country will provide reliable investment environment (including through a reform of the judicial system), and in the other – the country will continue to develop at moderate rates, and for a few generations ahead will have the last place (regarding income) in Europe guaranteed.
Economic reforms are not over yet. There are a few positive signals coming from the political sphere. Leading parties have been more open towards economists’ opinion. Now there is a better chance for providing fresh ideas to the current and following governments. The European commission would not manage this task. Maybe it will have even smaller success than the IMF and the World Bank, which in recent years literally failed in their attempts to induce market reforms in Bulgaria. The next stimulus for reforms will either come from inside the country, or there will not be any at all.
What is your opinion about this article?
0 agreed
0 disagreed