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Round table: The informal economy in Bulgaria: Policy responses in an economic crisis
On 3 December 2008 the Center for the Study of Democracy and Friedrich Ebert Foundation, Office Bulgaria organized a round table on the policy responses to the informal economy.

Dr. Ognian Shentov, Chairman of the Center for the Study of Democracy and Dr. Marc Meinardus, Director of Friedrich-Ebert-Stiftung, Office Bulgaria welcomed the partcipants and opened the round table. Mr. Ruslan Stefanov, Coordinator of the Economic program at the Center for the Study of Democracy presented the Hidden Economy Index 2008 for Bulgaria. The index levels continue to slowly decrease. At the same time however the perception levels of the business for the existence of grey economy in Bulgaria have increased since 2006. According the experts of the Center for the Study of Democracy there is a serious risk of future increase of the informal economy during an economic crisis.

Dr. Lubomir Christoff, Chairman of the Institute of Certified Financial Consultants, made an overview of Bulgaria’s readiness to face the global “financial” crisis. He pointed out that the crisis is in the process of metastasis into a global recession, which is expected to be the gravest and most prolonged in the last decades. The risk of depression stays. He also defined the advantages in Bulgaria’s starting position – the favorable state of the public balance – low level of government debt and presence of stable budgets surplus. The vulnerabilities, on the other hand, are external deficit, credit boom, overpriced assets (immovables), large private external debt (over 90% of GDP), lost competitiveness, institutional downfall – crime, corruption, irresponsibility, disorder. In conclusion Dr. Christoff noted the lack of adequate Bulgarian response to the crisis and the lack of leadership in its preparation.

The Minister of Economy and Energy, Mr. Petar Dimitrov proposed a number of measures to restrict the hidden economy and to counteract the effects of the global economic crisis, such as elaborating and monitoring of the policy in the area of good governance and countering corruption, introducing the euro as a parallel means of payment, improving SMEs access to financing, establishment of a business register of debtors, etc.

The Minister of Finance Dr. Plamen Oresharski listed the achievements of the revenue administration in restricting the hidden economy and defined the government’s work to this point as successful. Ms Maria Murgina, Director of the National Revenue Agency presented a number of specific recommendations for measures to counter the grey economy such as limiting the possibilities for transfer of firms with debts and “analogous” inspections of the social security payments. She underlined the importance of presence of political will for their implementation.

Mr. Boyko Borissov, Mayor of Sofia Municipality noted that some of the most damaging and hard to overcome manifestations of the hidden economy are the VAT drains, evading excise payments and the swaps of public with private real estates. He underlined that the political party he represents is ready to sign a pre-election pact with the governing parties for common actions against the economic crisis, which should be implemented regardless of the outcome of the next parliamentary elections in Bulgaria in 2009.

Dr. Yordan Hristoskov, Governor of the National Social Security Institute, focused on the potential effects of the economic crisis on undeclared employment. His expectations are that the share of undeclared employment will increase, however its overall level will decrease due to the decrease of economic activity.

Mr. Dimitar Batchvarov, Councilor at Sofia Municipality Council, underlined the necessity of a greater clarity regarding the effects of the possible changes in the economic situation on Bulgaria’s budget. His colleague at the Sofia Municipality Council Mr. Georgi Kadiev pointed out the need of establishing a fiscal police for achieving successful counteraction to the hidden economy.

Mr. Tihomir Bezlov, Senior Analyst at the Center for the Study of Democracy closed the official speeches by highlighting the risk of easier and stronger incursion of criminal assets into the economy that could use the hindrances of the legitimate business structures.

The event was a follow-up to the round table discussion held on 27 May 2008 on the trends and challenges of the grey economy.

Picture gallery:

Agenda of the Round table and presentations
Press release (Adobe PDF, 271 KB, in Bulgarian)
Round Table Discussion: Grey Economy: Trends and Challenges, 27 May 2008
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