Bulgaria June-July budget deficit falls to 1.8% of GDP

Bulgaria's budget deficit narrowed to 1.2 bln levs ($775.7 million), or 1.8% of GDP, in the first seven months of the year after the country received European Union funds in July, the government said on Wednesday.
The deficit for January-July of 1.8% of expected gross domestic product fell from a deficit of 2.2% of GDP for January-June.
Revenues dropped in the first seven months of the year by 8.4% from a year ago to 13.5 bln levs, as a drop in imports depressed receipts from value-added tax and excise duties, the Finance Ministry said.
Spending edged down 2.6% on an annual basis to 14.7 bln levs following government austerity measures including cutting funds for almost all ministries and transfers to municipalities.
The centre-right cabinet, which took office last July, increased its forecast for this year's budget deficit in May to 4.8% of GDP, from its initial forecast of 0.7%, citing delayed payments to businesses, extra spending for healthcare and infrastructure and after discovering hidden deficits piled up by the previous government.
The emerging economy contracted 1.5% in the second quarter after shrinking 5% in 2009 as a whole.
The Finance Ministry sees a return to growth this year, of 0.5%, pinning its hopes on rising exports. Increasing exports, however, would not boost tax revenues significantly.
Sofia has pledged to keep fiscal policy tight over the mid-term and halve the fiscal deficit to 2.5% of GDP next year.
It plans to fund the 2010 deficit through its hefty fiscal reserves, which Bulgaria is obliged to keep under its currency board arrangement. At the end of July, the reserves stood at 6.3 bln levs.
Sofia has pegged its lev currency to the euro in a regime which curtails central bank monetary operations, leaving fiscal policy as its key tool to steer the economy.