The Government’s Economic Program: No Left, No Right

The government has finally drafted and approved its governance program – three months after its formation. The document appears to be quite detailed, covering all areas of public and economic life.

Over the four years of its term, the Radev Cabinet promises fiscal consolidation, preservation of the country’s basic tax model, acceleration of industrialization and investment activity, deregulation and streamlined administrative services for businesses, as well as stricter control over public spending and market abuses.

The government has also set a goal of transitioning from an economy based on consumption, redistribution, and cheap labor to one focused on investment, productivity, and export-oriented high-tech manufacturing.

From an economic standpoint, the government does not position itself as “left” or “right.” Rather, the model can be described as pro-business from a fiscal standpoint, combined with an actively state-directed industrial policy. The Radev cabinet seeks to maintain tax predictability and reduce bureaucracy, but at the same time selects strategic sectors, builds industrial infrastructure, offers investment incentives, develops state-supported financial instruments, utilizes public-private partnerships (PPPs), and sets conditions in public procurement.

The contradiction that will need to be resolved

The most significant tension in the program lies between fiscal consolidation and the scale of the other promises. The government seeks a balanced budget and a reduced redistributive role, but at the same time plans major infrastructure and industrial investments, new investment incentives, support for small and medium-sized enterprises and technology, social protection, and annual pension increases.

The mechanism through which the program envisions achieving this is: higher tax collection rather than higher basic tax rates; cutting inefficient spending; stricter selection of public investments; maximizing EU funding; mobilizing private capital through public-private partnerships (PPPs) and the capital market; and higher economic growth resulting from these investments.

However, the document still lacks sufficient quantitative estimates to determine whether the implementation of the proposed policies would actually improve the fiscal balance.

Fiscal Policy: Consolidation Without Changing the Basic Tax Model

This is one of the most clearly articulated sections of the program. The Cabinet states its goal of a sustainable and predictable fiscal policy aimed at a balanced budget, the restoration of fiscal buffers, and the reduction of structural imbalances. Public resources should be redirected toward investments with long-term economic impact, and public debt management should maintain sustainable key debt parameters.

Tax policy is conservative and predictable. The program explicitly provides for maintaining the current proportional taxation model for both corporate income tax and personal income tax. It also provides for maintaining the current standard VAT rate. In other words, the program itself does not call for a transition to a progressive income tax system or for an increase in the standard VAT rate.

Additional revenue should be generated not by raising the basic tax rates, but through improved tax collection: combating the shadow economy, tax, customs, and social security fraud, better management of overdue public debts, risk analysis, and digital tools at the National Revenue Agency (NRA) and the Customs Agency. An AI-based unified X-ray center for customs control is also planned.

With regard to the budget deficit, the wording is even more specific: its sustained reduction with the aim of achieving a balanced budget and limiting public debt, as well as ending the excessive deficit procedure that the European Commission initiated against Bulgaria. To this end, fiscal consolidation is planned through stricter expenditure control and the prioritization of capital expenditures with high economic value added.

There is also a practical fiscal constraint: the government states its intention to maintain a maximum threshold for budget expenditures that allows for a deficit of up to 3% of GDP, while simultaneously encouraging private investment. The expected results also mention a gradual reduction in the state’s redistributive role.

However, there is an important caveat here. The program does not provide a complete numerical fiscal trajectory—for example, specific annual deficit targets for 2027, 2028, 2029, and 2030, a specific debt-to-GDP target, or an overall spending ceiling as a percentage of GDP. These parameters are left to the new medium-term fiscal-structural plan and the annual budget plans.

Public Expenditure Policy: “More Results for the Same Public Resources”

Here, the approach is distinctly managerial. The government envisages results-oriented budgeting, a direct link between expenditures and the government’s program, institutional reviews of expenditures, and a more rigorous assessment of effectiveness.

For public investments, a principle is being introduced that could be very significant if effectively implemented: a common mechanism for evaluating, prioritizing, and monitoring nationally funded investments, including a mandatory “cost-benefit” analysis above a certain threshold. This represents an effort to remove the capital program from purely political allocation and base it on measurable criteria.

The same logic is evident in administrative reform: merging overlapping structures, reducing management levels, shared services, centralizing certain public procurements, and reducing administrative costs.

For public enterprises, the plan calls for eliminating the automatic linking of management remuneration to the minimum wage and introducing a cap on remuneration.

Economic Policy: From Cheap Labor to a High-Value-Added Industrial Policy

This is likely the most significant strategic shift in the program. The cabinet has formulated an economic model based on industry, technology, productivity, innovation, and national capital, rather than merely a general improvement of the business environment. The state must be an active partner and seek out investors, rather than merely reacting to their requests.

Priority sectors include high-tech manufacturing, R&D centers, artificial intelligence, microelectronics, automotive manufacturing, the defense industry, and other high-value-added sectors. Industrial parks are becoming a key tool, with the government promising transportation, energy, digital, and water and sewer infrastructure around them, as well as links to universities and vocational education.

A selective industrial policy is particularly prominent. Plans include a National Industrial Strategy for 2026–2035, the identification of strategic and critical raw materials, expedited procedures for projects under the European Net-Zero Emissions Industry Act, and programs for robotics, AI, automation, and quantum technologies.

There is also an element of European industrial protectionism: for public procurement in construction and infrastructure, the program calls for “Made in the EU” criteria and the use of low-carbon materials sourced from local or European resources.

Investment Policy: A “Fast Track” for Strategic Investors

This is one of the most concrete sections. Changes are planned to the Investment Promotion Act, including expedited administrative procedures for strategic projects, maximum processing times, and new targeted investment incentives. Concurrently, the Industrial Parks Act and the Spatial Development Act must be amended to accelerate the implementation of strategic investments.

Institutionally, the model includes a central coordination unit under the supervision of a deputy prime minister, a national investment strategy, a unit for post-investment support for already certified investments, priority administrative services, and a unified investment portal (Invest Bulgaria) to digitize the process.

An interesting new institutional feature is the proposed independent investment ombudsman, who, according to the program, is tasked with protecting investors from administrative pressure, assisting in the resolution of investment disputes, and conducting legal analyses.

Fiscal Policy: Debt, Capital Markets, and European Integration

Here, the policy focuses more on financial stability and expanding sources of financing than on radical change.

The program envisages sustainable levels of public debt within legal limits, access to domestic and international capital markets, cooperation with international financial institutions, and the selection of debt instruments based on an optimal price-to-risk ratio.

In the financial sector, the plan calls for the timely transposition of European legislation, full participation in the Eurosystem, and deeper integration of the Bulgarian financial market with the European one.

The most significant economic change is the commitment to developing the capital market as an alternative to bank financing: more listings of Bulgarian companies, the development of a market for SME growth, venture and equity financing, and more active participation by institutional investors. The idea is to channel savings into the real economy.

For SMEs, the more direct model of state-supported financing through the Fund of Funds, the Bulgarian Development Bank, and the Bulgarian Export Insurance Agency will also be maintained.

Public-Private Partnerships Become a Key Investment Tool

The program proposes a new Public-Private Partnership Act to regulate the entire PPP lifecycle—preparation, structuring, financing, management, and oversight. The idea is to leverage private capital and expertise for transportation, energy, water, digital, social, and industrial infrastructure.

This is also one of the mechanisms through which the program seeks to reconcile two otherwise difficult-to-reconcile goals: a major investment program and fiscal consolidation at the same time.

European Funds: From “Absorption” to Investment Policy

The government has made the full absorption of current European programs a fiscal and economic priority, as the loss of European funding would shift some of the projects onto the national budget.

For the period 2028–2034, European funding should be directed toward competitiveness, high-tech industry, innovation, transportation, human capital, capital markets, and green and digital transformation.

A significant regulatory change is the promise of easier access to EU funds: simpler rules for small projects, automated assessment, standardized documentation, and a ban on the administration requiring applicants to submit documents that it can obtain on its own through official channels.

Regulatory Policy Toward Business: Deregulation, Digitalization, and “Tacit Consent”

The program promises measures to reduce the administrative burden, optimize services, and introduce “tacit consent” for certain administrative services. The measurable results cited include fewer licensing and permitting regimes, shorter processing times, and more e-services.

This is supported by the overall administrative reform, in which reducing the administrative burden and digitization are explicitly identified as guiding principles.

In the construction sector, a unified information system for urban planning, investment design, and building permits is envisaged, as well as a public GIS portal for urban plans.

Stronger Government Oversight

The Cabinet proposes fewer administrative barriers for legitimate businesses, but at the same time stricter rules against monopolies, cartels, rigged public procurement, and corrupt practices.

The program calls for the elimination of regulatory preferences and cartels, “breaking up monopolies,” mechanisms to exclude from public procurement participants found to have engaged in bid-rigging, a registry of compromised contractors, and an annual analysis of non-competitive awarding of contracts.

There is also greater transparency in the procurement process itself: annual indicative plans, centralized procurement, and public data.

Consequently, the regulatory model can be summarized as “less bureaucratic permitting, but more oversight of competition and public resources.”

Energy regulations remain in place

Regarding electricity, the cabinet does not foresee automatic and immediate liberalization of the residential market. First, there must be a socioeconomic analysis of the impact on prices, inflation, incomes, energy poverty, and the budget, followed by the development of a phased model that protects vulnerable consumers. There are even plans to analyze the possibility of block pricing.

This shows that the government views liberalization not as an end in itself, but as a regulated transition in which competition is limited by social and price safeguards.

Labor Market Rules Are Changing

New forms of work – job sharing, employee sharing, and platform work—are planned, as well as a new mechanism for setting the minimum wage. However, the formula itself is not specified in the program.

Translated with DeepL.