Petkova presented the new 2026 Budget, in line with business demands

Late on Friday evening, the Ministry of Finance published the new version of the Draft State Budget for 2026 and the updated Medium-Term Budget Forecast for the period 2026 – 2028. The government's plan is for the state's financial framework to be reviewed by the Tripartite Council on Monday morning (December 8), meaning that businesses and trade unions have only two days (Saturday and Sunday) to assess whether their demands have been met. On Monday afternoon, the new state budget must be submitted to the National Assembly and begin its journey to the final vote, which must take place by the end of the month.

At first glance, it is clear that the document reflects many of the criticisms that the previous version received from all sides, but especially from the business community. Firstly, the deficit for 2026 remains within the limit of 3% of GDP, and budget redistribution also remains at around 45% of the size of the economy, again violating the Public Finance Act. Total budget expenditure has been reduced by only €1 billion to just over €54 billion for 2026. Revenue has been reduced by the same amount to just over €50 billion.

The resulting deficit (around €3.2 billion) will be financed by taking on new debt. However, as in the previous version of the budget, the government will not limit itself to covering this shortfall, but will draw a total of €10 billion in loans in 2026 and plans to continue to significantly increase the country's debt burden in the coming years. Based on the assumptions, the public debt is expected to reach €37.6 billion (31.3% of GDP) in 2026, €43.5 billion (34.2% of GDP) in 2027, and €49 billion (36.6% of GDP) in 2028.

In 2026 alone, the automatic mechanism for increasing salaries in law enforcement agencies will be abolished, and they will grow by "only" 10%. Teachers' salaries will continue to be linked to 125% of the national average.

It seems that Boyko Borisov's "request" to remove the automatic determination of the minimum wage as a function of the average has been fulfilled. In 2026, it will become €620 and will be frozen at that level for at least the next three years.

The controversial plans for the state to buy Lukoil and give the state lottery on concession have been dropped.

Businesses have been spared from an increase in social security contributions this year, but this will happen in 2027 (by 1 percentage point) and again in 2028 (by another 2 percentage points). The maximum social security threshold will increase significantly in each of the next three years.

For the same period, GDP growth is expected to be in the range of 2.5–2.4%. Average annual inflation for 2026 is expected to be close to that in 2025 – 3.5% – and will slow to 2.9% in 2027 and 2.5% in 2028. The forecast has also been confirmed by the Fiscal Council. It is close to the expectations of international institutions such as the EC, OECD, and others, according to the Ministry of Finance.

Changes in tax legislation

Expanding the scope of goods with high fiscal risk – something that was also included in the previous version;
Expansion of the electronic tracking system for vehicles transporting goods with high fiscal risk – something that was also included in the previous version;

Introduction of tax relief in the Corporate Income Tax Act for research and development activities (R&D), whereby taxable persons carrying out R&D will be recognised 7 for tax purposes an additional 25 per cent of their R&D expenses in the year of reporting, when certain conditions are met. If a long-term intangible asset is formed as a result of development activities, it is proposed that the taxpayer be entitled to increase the tax depreciation value of this asset by 25 per cent;

Continuation of the policy of using tax relief under Articles 22c and 22d of the Income Tax Act (for children and children with disabilities) at an increased rate in 2026;

Provision of a more favorable depreciation regime for tax purposes for electric vehicles;

From January 1, 2026, an increase in the variable part of the fee under Article 30, paragraphs 3 and 4 of the Gambling Act is envisaged for licenses to organize gambling games from 20 percent to 22 percent – there is a discount for gambling companies here, as in the previous version the fee increase was up to 25%;

Continuing effect of the new excise calendar for excise rates on tobacco and tobacco products introduced on May 1, 2025, with the aim of a balanced gradual increase in excise rates on tobacco and tobacco products. for excise duty rates on tobacco and tobacco products with the aim of a balanced, gradual increase in excise duty rates on tobacco and tobacco products – something that was also included in the previous version.

Social security policy for the period 2026 – 2028

From January 1, 2027, the social security contribution to the Pension Fund of the State Social Security (SSS) will increase by 1 percentage point, and from January 1, 2028, by 2 percentage points. In the previous version, the increase was to start as early as next year (by 2 points) and by another 1 point in 2027.

The minimum insurance income for self-insured persons will increase to €620.20 from January 1, 2026, which was also included in the previous version. The automatic mechanism will be suspended and the minimum wage will be frozen at this level until at least 2028.

The maximum social security income for all insured persons will increase from €2,300 on January 1, 2026, to €2,505 in 2027 and €2,659 in 2028.

Policies increasing expenditure

Increase in the minimum wage (MW) from 1 January 2026 to €620.20, remaining at this level until 2028;
Increase in the amount of child-rearing allowance for children up to 2 years of age to €460.17 for the entire period up to and including 2028;

Increase in the amount of cash benefits for raising a child up to 8 years of age by the father (adoptive parent) to €460.17 for the entire period up to and including 2028;

The amount of the cash benefit for non-use of leave for pregnancy and childbirth under Article 50a of the Social Security Code is increased from 50% to 75%, for not using the leave for raising a child up to 2 years of age under Article 54 of the Social Security Code and for not using the leave for adoption of a child up to 5 years of age under Article 53d of the Social Security Code;
Pensions for employment granted by December 31 of the previous year shall be updated as of July 1 of the respective year under Article 100 of the Social Security Code or the so-called "Swiss rule";

Implementation of a common income policy by increasing personnel costs in the budgetary sphere for 2026 by 10% and eliminating automatic mechanisms for determining the amount of remuneration in certain sectors linked to the average wage;

Maintaining the income policy for teaching professionals in the pre-school and school education system;

Launching a support program for medical specialists with €30 million in funding secured for 2026;

Increased funding for municipal budgets as a result of changes in the natural indicators in the area of state-delegated activities in the fields of culture, social services, healthcare, etc.

Policies and measures for cost optimization

For the period 2026 – 2028 After review and assessment, the Council of Ministers and municipal mayors shall optimize the total number of administrative staff of the executive branch under Articles 36–38 of the Administration Act with the aim of achieving a reduction in the total number of staff by no less than 5,500 full-time positions, which have been permanently vacant for more than six months, distributed proportionally over the period;

In 2026, the individual basic monthly salaries of the central and territorial bodies of the executive branch, as well as those specified in Article 19, paragraph 4 of the Administration Act, shall be determined at the level of the last individual basic monthly salary determined as of December 31, 2025, unless otherwise provided by law. Changes to the individual salaries of these bodies after December 31, 2026, shall be determined within the limits of personnel expenses and in accordance with the percentage increase in the salaries of public sector employees;

In the Ministry of Interior and the Ministry of Defense, the provisions regarding the link to the average salary as a basis for determining the amount of the basic monthly remuneration/basic monthly salary will not apply, and for 2026 it is proposed that the 2025 basis be maintained, indexed by 10%.

Investment policy

Capital expenditure in 2026 amounts to EUR 7 billion, including EUR 3.17 billion in national funding and EUR 3.86 billion in European funding (including the National Public Investment Program). In line with the available budget resources and the prioritization carried out by the PRB, the main strategic investment projects have been identified and included in the "Program for Priority Strategic Investment Projects with National Funding for the Period 2026 – 2028" – an annex to the draft Law on the State Budget of the Republic of Bulgaria (ZDBARB) for 2026, with the duration of the program being in line with the National Medium-Term Fiscal Structural Plan of the Republic of Bulgaria for the period 2025 – 2028. The funds for capital expenditures in 2026 for the financial support of priority strategic investment projects with national funding are within the approved capital expenditures in the budgets of the primary budget administrators for 2026.

The Investment Program for Municipal Projects is expected to continue, with the total maximum value of the funds allocated in 2026 under agreements concluded for projects under Annex 3 to the draft state budget for 2026, including projects commissioned and implemented by mayors of districts in cities with district divisions, is up to EUR 920.3 million. Payments will be made by the Bulgarian Development Bank under the terms and conditions set out in an act of the Council of Ministers. This will ensure the implementation of the projects that have already started, enable the achievement of the set goals for improving the infrastructure in the municipalities and their economic development, and provide an opportunity to improve the drinking water supply to the population.

Translated with DeepL.