17.05.2022

KRISTALINA GEORGIEVA: JOINING THE EUROZONE IS NOW MORE COMPLICATED DUE TO HIGH INFLATION

Joining the eurozone is a logical step for Bulgaria, because then it will not only receive monetary policy, but will also be able to influence this monetary policy. This was said by the managing director of the International Monetary Fund Kristalina Georgieva to journalists at the University of National and World Economy after receiving the honorary title "Doctor Honoris Causa".

"Bulgaria has a currency board and our monetary policy is determined by the European Central Bank. Joining the eurozone is now more difficult due to high inflation. However, this is due to external shocks and the war in Ukraine. The problem of rising prices affects all countries except "Japan and several Asian countries. It is very likely that the ECB and eurozone ministers will take into account the fact that inflation in our country is external and this will not affect the deadline for the adoption of the euro," said Kristalina Georgieva.

When asked whether Bulgaria should or should not join the eurozone, I would answer with another question: "Is there anyone in Bulgaria who wants the currency board to fall?". So far I have not seen in public opinion polls fall. "So far, I have not seen in opinion polls public sentiment about the fall of the currency board and we to be without its protection. Once our currency is pegged to the euro, it is much better for us to participate in shaping policies that affect our country," Georgieva said.

"We see inflation above ten percent in our country, but we expect inflation to be contained in 2023. Central banks are already taking decisive measures to curb rising prices in the EU. This year, inflation may accelerate slightly before we already know what it is like to have an energy shock and measures are being taken, "Georgieva said.

Asked whether the flat tax in Bulgaria should be abolished, Kristalina Georgieva pointed out that the IMF's recommendation is to assess the impact of the flat tax, and not necessarily to reform it. "Such an assessment has not been made and it is good to see how it works and whether the conditions that led to its introduction still exist in our country. I think that in Bulgaria, where inequality is deepening, it is important to assess whether fiscal policy can help both taxes and social funds to reduce this inequality, "said the IMF director.

Kristalina Georgieva commented that the measures in the government's anti-crisis package have been chosen very correctly. The most important thing at the moment is for Bulgaria to absorb the EU money and to include in the anti-crisis measures the acceleration of the projects stopped due to "open corruption". She gave the example of the Echemishka tunnel on the Hemus highway, which she passed through last weekend. This is a dead end and it is very important in anti-crisis measures to restart such projects," she said.

According to the director of the IMF, there are many unknowns about what will happen this year - we do not know how long the war in Ukraine will last, as well as its consequences, and whether the pandemic will not spread again. Currently, the two biggest problems in the world, according to her, are the slowdown in China's economic growth and inflation.

"We projected China's GDP to grow by 5.5 percent, but now we have lowered it to 4.4 percent and are likely to adjust further down. Inflation calls for a tightening of monetary policy, which could slow economic growth and bring in Bulgaria is not threatened by a recession, the IMF forecasts GDP growth in our country of 3 percent, while the previous forecast was 4.2 percent growth this year. "However, at the IMF, we have revised the economic growth of 143 countries, which make up 86 percent of the world's GDP," Georgieva said.