Bulgaria's Draft Budget for 2025: 3% Deficit, State Debt Growth, and Key Tax Changes

The Bulgarian Ministry of Finance has unveiled the draft budget for 2025, alongside the updated medium-term fiscal forecast covering 2025 to 2028. The draft foresees a 3% deficit for the upcoming four years, while the country's state debt is projected to rise to 81 billion leva by 2028. The budget's revenue is expected to reach 92.5 billion leva, with expenditures amounting to 98.9 billion leva, resulting in a deficit of 6.4 billion leva in 2025.

Key changes in the draft include maintaining pension contributions at the 2025 level, with a 3% increase planned for 2026 and a 2% rise in 2027. The minimum wage is set to increase by 1,077 leva starting next year, and a 10% hike in public sector wages is planned, with higher pay increases in defense, security, and education sectors.

Excise taxes on alcohol and tobacco are expected to rise, while a 15% one-time tax on undeclared income is also proposed. The draft budget does not include the anticipated taxation of excess profits from banks. Further, it outlines a comprehensive tax administration reform, integrating customs under the National Revenue Agency, alongside a focus on reducing tax evasion. The updated medium-term forecast anticipates a steady GDP growth rate of 2.8% in 2025, with inflation slowing to 2% by 2028.

In terms of social insurance, the draft suggests no change in the pension fund contribution for 2025, although it plans an increase starting in 2026. The minimum social insurance income for self-employed individuals and farmers will rise to 1,077 leva in 2025, remaining stable throughout the forecast period. The maximum social security income is set to increase gradually, reaching 5,030 leva by 2028.

The state debt will grow significantly during this period, with the 2025...