The economic stability established in the last few years and the preconditions for growth, together with the expected membership of the country in NATO (2002) and the EU (2006), are sufficient proof of the secure and predictable economic and political environment in Bulgaria.

The Government Program defines the general economic priorities that are to lead to sustained and real growth. These priorities are both a factor, which, if absent, would impede many of the suggested policy measures, and an effect, as all program targets are designed to create prosperity.

The Bulgarian Government's key objective is sustained economic growth as high as 5-7% on average per year in the period 2002-2005. Most of the targets and economic levers are geared towards reaching this economic goal. It is also an indispensable condition for ensuring a better quality of life and raising the standard of living of Bulgarian citizens. Generating conditions for rapid economic growth leads to job creation and higher income. The IT environment as one of the most dynamic tools of the new economy plays a significant role in the creation of skilled jobs and directly favors the GNP growth.

The Government pursues a national industrial policy in line with the processes of globalization of the economy and liberalization of world trade. The Government is well aware that the support to small and medium business in the country is crucial for the success of reforms. The development of small and medium-sized enterprises, which are the biggest employer and the biggest investor in Bulgaria, is promoted in every possible way.

*Source: Business Central Europe and Ministry of Finance

Macroeconomic Indicators

	1996	1997	1998	1999	2000	2001	2001E	2002F
Foreign debt (% GDP)	243.5	91.1	72.1	77.5	74.1	73.3	68.4	64.4
Balance of payments (USD m)	-724	1,205	-95	96	137	-52	-221	242
Current account (USD m)	-56	367	-61	-652	-701	-597.3	-801	-812
Current account (% GDP)	1.7	10.3	-0.5	-5.3	-5.8	-4.4	-6.2	-5.7
Trade balance (USD m)	122	321	-381	-1 081	-1 175	-1 247	-1 528	-1 575
Exports (USD m)	4 689	4 809	4 193	4 006	4 825	4 254	5 096	5 373
Imports (USD m)	4 568	4 488	4 574	5 087	6 000	5 501	6 624	6 948
Import coverage (months)	2.1	6.5	6.4	5.8	5.4	4.6	4.8	4.7
FDI (USD m)	256	636	620	766	1 001	522	858	981

Investment policy is an important aspect of the growth model. The Government's economic strategy plans to attract sizeable foreign investment averaging between 1 and 1.2 billion US dollars each year from 2002 to 2005. A declared commitment of the Government is to create an environment that is friendly to Bulgarian and foreign investment and to the balanced development of small, medium and big business. The Government sticks to clear rules and offers incentives to local and foreign capital while it abides to the principles of market economy.

Improvement of the trade balance is an indispensable condition and a lot of effort is put forth in this direction. An aggressive export promotion policy and making Bulgaria a big exporter of high value-added products are key priorities of the Government in limiting the trade deficit and the current account deficit. The improved export/GDP ratio is expected to improve the balance of payments and solidify the country's macroeconomic stability. Foreign economic policy, which plays a key role in the country's foreign policy and overall economic development, is considered of paramount importance to Bulgaria between now and 2005. The Government will continue to combine bilateral, regional and multilateral initiatives to offer better opportunities to Bulgarian industries and to help Bulgarian exporters enter new markets.

Fiscal policy with a currency board arrangement in place is a key economic policy tool. Its proper use and the right budget planning, item by item, determines the country's overall economy. Financial and budget discipline is strictly maintained in the budget deficit reduction policy with the ultimate goal of a zero deficit in 2005.

Curbing inflation by fiscal policy instruments is a strategic priority of the Government.

The monetary policy supports the macroeconomic stability by maintaining an anchored Lev/euro exchange rate until Bulgaria joins the European Monetary Union. The replacement of an active monetary policy in 1997 by a currency board regime (BGN 1= EURO 0.5113), in combination with additional measures in the fiscal, banking and real sectors, has proved to be decisive for stabilizing the Bulgarian economy.

Stable GDP Growth	Inflation is Well Under Control

The tax and customs policy seeks to attract investments and achieve economic growth. The Government has proposed to cut down those direct taxes that enable individuals and businesses to retain higher net incomes, boost demand, promote investments and business activity, and improve the budget revenue performance in the long run. Such policy measures will sizably decrease direct taxes - profit tax, income tax and capital gains tax.

The Government has reduced the tax burden:

• Personal taxation - the highest rate drop from 38% to 29%;
• Corporate profit tax - down to 15% (one of the lowest in the world!);
• Zero VAT rate on export of software;
• Zero capital gains tax on sales of shares and tradable rights on the Bulgarian Stock EExchange.

Maintaining High Economic Growth

• Radical tax reform
• Attraction of investment and acceleration of the privatisation process
• Aggressive export promotion
• Improvement of the business environment with special attention to SMEs
• Financial industry and capital markets development
• Back up the high-tech industry, achieve higher productivity
• Improve the infrastructure
• Further liberalisation of prices and trade

The Government has identified the development of communications and high-technologies as one of the pillars of sustainable economic growth.

The program of the government is built on the following premises:

• Enhanced competitiveness and innovation should result from the wide implementation of cutting-edge technologies, particularly in the areas of IT and telecommunications, from maintaining high standards in education, and from modernising the economy and constructing a state-of-art infrastructure;
• ICT investments should be viewed as a factor stimulating investments in other fields;
• ICT is becoming a major engine of economic growth.

The government has set the following strategic objectives:

• Promote investments in the ICT sector and the development of R&D networks;
• Create a competitive, export-oriented software industry;
• Capitalize on Bulgarian strong educational traditions;
• Encourage the small and medium enterprises in the ICT sector;
• Encourage young graduates to start their own businesses in Bulgaria.

On 1 December 2001, Bulgaria's Prime Minister H.E. Simeon Saxe-Coburg-Gotha made a commitment to appoint a focal point to co-ordinate all government initiatives for advancing Information and Communications Technologies (ICT) in the country. In his address to a high-level Government Retreat on ICT for Development, organized by UNDP Bulgaria, the Prime Minister announced that developing the ICT sector was a priority for his administration: "I would like to reiterate that a key goal of the Bulgarian government is to retain and advance the nation's intellectual potential. By setting up research and development centres in our country, capable of working from a distance on large corporate projects around the globe, we could keep our children here, offer them good professional opportunities and a respectable reward for their labour. As a sign of the importance we attach to ICT development, the individual ministries have committed themselves to implement a strategy for the promotion of this sector. To achieve better concordance in the actions of the individual ministries and to assure ourselves of a speedier progress towards our goals, we will appoint a specific person, who will assume the important task of coordinating our efforts".