Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Bulgaria and delivering a Council opinion on the 2023 Convergence Programme of Bulgaria
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Bulgaria, economic policy, economic recovery, economic reform, energy policy, fiscal policy, improvement of housing, stability pact, stability programme, transport policy

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 602 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Bulgaria and delivering a Council opinion on the 2023 Convergence Programme of Bulgaria {SWD(2023) 602 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Bulgaria and delivering a Council opinion 
on the 2023 Convergence Programme of Bulgaria 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investments,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make  the 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022 in accordance with 
Article 11(2) of Regulation (EU) 2021/241.  

(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey3,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the  survey  around the 

1 
2 

3 

OJ L 209, 2.8.1997, p. 1. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 
COM(2022) 780 final. 

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four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the 2023 Alert Mechanism Report, in which it did not identify Bulgaria as one of the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. The Commission also adopted a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which the Council adopted on 16 May 2023, as well as the proposal for the 2023 
Joint  Employment  Report  analysing 
the  Employment 
the 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 13 March 2023.  

implementation  of 

(3)  While the EU economies  are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and  inclusive  growth,  safeguard  macroeconomic  stability,  and  increase  resilience  in 
the medium term. It also focuses heavily on increasing the EU’s competitiveness and 
productivity. 

(4) 

(5) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial  Plan  for  the  Net-Zero  Age4  to  boost  the  competitiveness  of  the  EU’s  net-
zero  industry  and  support  the  fast  transition  to  climate  neutrality.  The  plan 
complements  ongoing  efforts  under  the  European  Green  Deal  and  REPowerEU.  It 
aims to provide a more supportive environment for scaling up the EU’s manufacturing 
capacity  for  the  net-zero  technologies  and  products  required  to  meet  the  EU’s 
ambitious climate targets, as well as ensuring access to relevant critical raw materials, 
including  by  diversifying  sourcing,  properly  exploiting  geological  resources  in 
Member States and  maximising the recycling  of raw materials. The plan  is  based on 
four pillars:  a  predictable and simplified regulatory  environment,  speeding up access 
to finance, enhancing skills, and open trade for resilient supply chains. On 16 March 
2023,  the  Commission  also  issued  the  Communication  Long-term  competitiveness  of 
the EU: looking beyond 20305, structured along nine mutually reinforcing drivers with 
the objective to work towards a growth enhancing regulatory framework. It sets policy 
priorities  aimed  at  actively  ensuring  structural 
improvements,  well  focused 
investments and regulatory measures for the long-term competitiveness of the EU and 
its Member States. The recommendations below help address those priorities. 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 
for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) 2021/241.  

4 
5 

COM(2023) 62 final.  
COM(2023) 168 final.  

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(7) 

(8) 

6 

7 
8 

The REPowerEU Regulation6 adopted on 27 February 2023 aims to rapidly phase out 
the  EU’s  dependence  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve the REPowerEU objectives. They will also help boost the competitiveness of 
the EU’s net-zero industry as outlined in the Green Deal  Industrial Plan for the Net-
Zero Age and address the energy-related country-specific recommendations issued to 
the  Member  States  in  2022  and,  where  applicable,  in  2023.  The  REPowerEU 
Regulation  introduces  a  new  category  of  non-repayable  financial  support,  made 
available  to  Member  States  to  finance  new  energy-related  reforms  and  investments 
under their recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination7.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023  stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels,  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
price  pressures,  Member  States  should  target  such  measures  much  better  than  in  the 
past  towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the 
fiscal  recommendations would be  quantified and differentiated  and be  formulated on 
the basis of net primary expenditure as proposed in its Communication on orientations 
for  a  reform  of  the  EU  economic  governance  framework8.  It  recommended  that  all 
Member States should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive reform of the EU’s economic governance rules. The central objective 
of the proposals is to strengthen public debt sustainability and promote sustainable and 
inclusive growth in all Member States through reforms and investments. The proposals 
aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 

Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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Member  States  deliver  on  the  commitments  undertaken  in  their  medium-term  fiscal-
structural plans. The objective is to conclude the legislative work in 2023. 

On  15  October  2021,  Bulgaria  submitted  its  national  recovery  and  resilience  plan  to 
the  Commission,  in  accordance  with  Article  18(1)  of  Regulation  (EU)  2021/241. 
Pursuant  to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the 
relevance, effectiveness, efficiency and coherence of the recovery and resilience plan, 
in  accordance  with  the  assessment  guidelines  of  Annex  V  to  that  Regulation.  On  4 
May 2022, the Council adopted its Decision on the approval of the assessment of the 
recovery and resilience plan for Bulgaria9. The release of instalments is conditional on 
a decision by the Commission,  taken in  accordance with  Article 24(5) of  Regulation 
(EU)  2021/241,  that  Bulgaria  has  satisfactorily  fulfilled  the  relevant  milestones  and 
targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory  fulfilment 
presupposes  that  the  achievement  of  preceding  milestones  and  targets  has  not  been 
reversed. 

(10)  On  5  May  2023,  Bulgaria  submitted  its  2023  National  Reform  Programme  and  its 
2023  Convergence  Programme,  in  line  with  Article  8(1)  of  Regulation  (EC)  No 
1466/97.  To  take  account  of  their  interlinkages,  the  two  programmes  have  been 
assessed  together.  In  accordance  with  Article  27  of  Regulation  (EU)  2021/241,  the 
2023  National  Reform  Programme  also  reflects  Bulgaria’s  biannual  reporting  on  the 
progress made in achieving its recovery and resilience plan.  

(11)  The Commission published the 2023 country report for Bulgaria10 on 24 May 2023. It 
assessed  Bulgaria’s  progress 
relevant  country-specific 
in  addressing 
recommendations  adopted by  the Council  between 2019  and  2022 and  took stock of 
Bulgaria’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new  and  emerging  challenges.  It  also  assessed  Bulgaria’s  progress  on  implementing 
the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.  

the 

(12)  Based  on  data  validated  by  Eurostat,11  Bulgaria’s  general  government  deficit 
decreased from 3.9% of GDP in 2021 to 2.8% in 2022, while general government debt 
fell from 23.9% of GDP at the end of 2021 to 22.9% at the end of 2022. On 24 May 
2023,  the  Commission  published  a  report  under  Article  126(3)  TFEU;12  the  report 
discussed  the  budgetary  situation  of  Bulgaria,  as  its  general  government  deficit  is 
planned to exceed 3% of GDP in 2023. The report concluded that the deficit criterion 
is  not  fulfilled. In line with the Communication of 8 March 2023,13 the Commission 
did not propose to open new excessive deficit procedures in spring 2023; in turn, the 
Commission  stated  that  it  would  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024, on the basis of the outturn data for 2023. 
Bulgaria should take account of this in the discussion and execution of its 2023 budget 
and in preparing its budget for 2024. 

9 

10 
11 
12 
13 

Council Implementing Decision of 4 May 2022 on the approval of the assessment of the recovery and 
resilience plan for Bulgaria (ST 8091/22; ST 8091/22 ADD 1). 
SWD(2023) 602 final. 
Eurostat-Euro Indicators, 47/2023, 21.4.2023 
COM(2023) 631 final, 24.5.2023. 
COM(2023) 141 final, 8.3.2023. 

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(13)  The  general  government  balance  has  been  impacted  by  the  fiscal  policy  measures 
adopted to mitigate the economic and social impact of the increase in energy prices. In 
2022, such revenue-decreasing measures included reduced VAT rates for heating and 
gas  and  lower  excise  duty  on  electricity  and  natural  and  liquid  gas;  while  such 
expenditure-increasing  measures included subsidies to non-household consumers and 
electricity  system  distribution  operators  for  the  consumption  of  electricity  and  to 
households for the consumption of natural gas and district heating. The cost of these 
measures was partly offset by new taxes on  windfall profits of energy producers and 
suppliers,  namely  a  temporary  levy  to  energy  sector  state-owned  enterprises.  The 
Commission  estimates  the  net  budgetary  cost  of  these  measures  at  1.5%  of  GDP  in 
2022. The general government balance has also been impacted by the budgetary cost 
of temporary protection to displaced persons from Ukraine, which is estimated at 0.1% 
of  GDP  in  2022.  At  the  same  time,  the  estimated  cost  of  COVID-19  temporary 
emergency measures dropped to 1.0% of GDP in 2022, from 3.7% in 2021. 

(14)  On  18  June  2021,  the  Council  recommended  that  in  2022  Bulgaria14  pursue  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience  Facility,  and  preserve  nationally  financed  investment.  The  Council  also 
recommended Bulgaria to keep the growth of nationally financed current expenditure 
under control.  

(15)  According to the Commission estimates, the fiscal stance15 in 2022 was supportive, at           
– 1.2%  of  GDP,  as  recommended  by  the  Council.  As  recommended  by  the  Council, 
Bulgaria  continued  to  support  the  recovery  with  investments  to  be  financed  by  the 
Recovery  and  Resilience  Facility  and  other  EU  funds.  Expenditure  financed  by 
Recovery  and  Resilience  Facility  grants  and  other  EU  funds  amounted  to  0.8%  of 
GDP  in  2022  (0.9%  of  GDP  in  2021).  Nationally  financed  investment  provided  an 
expansionary  contribution  of  0.5  percentage  points  to  the  fiscal  stance.16  Bulgaria 
therefore preserved nationally financed investment,  as  recommended by the Council. 
At the same time, the growth in nationally financed primary current expenditure (net 
of  new  revenue  measures)  provided  an  expansionary  contribution  0.8  percentage 
points  to  the  fiscal  stance.  This  expansionary  contribution  included  the  additional 
impact  of  fiscal  policy  measures  to  mitigate  the  economic  and  social  impact  of  the 
increase in energy prices (additional net budgetary cost of  0.9% of GDP), as well as 
the  costs  to  offer  temporary  protection  to  displaced  persons  from  Ukraine  (0.1%  of 
GDP).  Bulgaria  therefore  sufficiently  kept  under  control  the  growth  in  nationally 
financed current expenditure. 

(16)  The  macroeconomic  scenario  underpinning 

the 
Convergence  Programme  is  optimistic  in  2023  and  thereafter.  The  government 
projects  real  GDP  to  grow  by  1.8%  in  2023  and  3.3%  in  2024.  By  comparison,  the 
Commission 2023 spring forecast projects a lower real GDP growth of 1.5% in 2023 
and  2.4%  in  2024,  mainly  due  to  a  more  negative  assumption  on  the  evolution  of 

the  budgetary  projections 

in 

14 

15 

16 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Convergence 
Programme of Bulgaria, OJ C 304, 29.7.2021, p. 6. 
The  fiscal  stance  is  measured  as  the  change  in  primary  expenditure  (net  of  discretionary  revenue 
measures), excluding Covid-19 crisis-related temporary emergency measures but including expenditure 
financed  by  non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds, 
in 
the Fiscal Statistical Tables.   
Other  nationally  financed  capital  expenditure  is  projected  to  provide  a  neutral  contribution  of  zero 
percentage points of GDP. 

growth. For  more 

to  medium-term 

see  Box 1 

potential 

relative 

details 

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inventories in the Commission forecast and despite its more favourable projection on 
exports and imports in 2023. For 2024 the lower real GDP growth in the Commission 
forecast  is  mainly  due  to  large  negative  differences  in  the  contributions  of  private 
consumption, investment, and exports. 

In  its  2023  Convergence  Programme,  the  government  expects  that  the  general 
government  deficit  ratio  will  increase  to  6.1%  of  GDP  in  2023.  According  to  the 
Convergence  Programme,  the  increase  in  deficit  in  2023  mainly  reflects  adopted 
measures to increase pensions and wages, the impact of pension indexation to inflation 
and  average  wage,  higher  expenditure  on  social,  health  and  education  policy  and  a 
higher national spending on public investment. The programme does not include any 
other  policy  change  or  consolidation  measures,  as  the  2023  budget  that  may  include 
such  fiscal  policy  measures  was  not  adopted  by  the  time  of  the  submission  of  the 
Convergence Programme. According to the programme, the general government debt-
to-GDP ratio is expected to  increase from 22.9% at  the end of 2022  to  26.6% at  the 
end  of  2023.  The  Commission  2023  spring  forecast  projects  a  government  deficit  of 
4.8%  of  GDP  for  2023.  This  is  lower  than  the  deficit  projected  in  the  Convergence 
Programme,  mainly  due  to  a  lower  expected  public  investment  and  higher  revenue 
both  from  taxes  and  the  EU.  The  Commission  2023  spring  forecast  projects  a  lower 
general government debt-to-GDP ratio, of 25% at the end of 2023. The difference is 
due  to  lower  projected  deficit  and  different  assumptions  on  the  implementation  and 
payments from Recovery and Resilience Facility. 

(18)  The government balance in 2023 is expected to continue to be impacted by the fiscal 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices.  They  consist  of  measures  extended  from  2022  (in  particular:  the  subsidies  to 
non-household consumers). The cost of these measures continues to be partly offset by 
taxes  on  windfall  profits  of  energy  suppliers,  namely  solidary  contribution  under 
Regulation  (EU)  2022/1854.  Taking  these  revenues  into  account,  the  net  budgetary 
cost  of  the  support  measures  is  projected  in  the  Commission  2023  spring  forecast  at 
0.8%  of  GDP  in  202317.  The  measures  in  2023  do  not  appear  targeted  to  the  most 
vulnerable  households  or  firms,  and  do  not  fully  preserve  the  price  signal  to  reduce 
energy demand and increase energy efficiency. Finally, the 2023 government balance 
is  expected  to  benefit  from  the  phasing  out  of  COVID-19  temporary  emergency 
measures of 1.0% of GDP. 

(19)  On  12  July  2022,  the  Council  recommended18  that  Bulgaria  take  action  to  ensure  in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance19,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people fleeing Ukraine. Bulgaria should stand ready to adjust current spending to the 
evolving  situation.  Bulgaria  was  also  recommended  to  expand  public  investment  for 
the  green  and  digital  transitions,  and  for  energy  security  taking  into  account  the 

17 

18 

19 

The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as – where relevant – capital expenditure measures. 
Council  Recommendation  of  12 July  2022  on  the  2022  National  Reform  Programme  of  Bulgaria  and 
delivering a Council opinion on the 2022 Convergence Programme of Bulgaria OJ C 334, 1.9.2022, p. 
11.  
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Bulgaria, which is used to measure the fiscal stance, is estimated at 12.9% in nominal terms. 

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REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and  Resilience 
Facility and other Union funds.  

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary  – 3.1%  of  GDP,  in  a  context  of  high  inflation.  This  follows  an 
expansionary  fiscal  stance  in  2022  (– 1.2%  of  GDP).  The  growth  in  nationally 
financed primary current expenditure (net of discretionary revenue measures) in 2023 
is  projected  to  provide  an  expansionary  contribution  of  1.9%  of  GDP  to  the  fiscal 
stance.  The  expansionary  contribution  of  nationally  financed  net  primary  current 
expenditure is not due to a targeted support to households and firms most vulnerable to 
energy  price  hikes  and  to  people  fleeing  Ukraine.  In  sum,  the  projected  growth  of 
nationally  financed  primary  current  expenditure  is  not  in  line  with  the  Council 
recommendation.  Bulgaria  is  projected  to  finance  additional  investment  through  the 
Recovery  and  Resilience  Facility  and  other  EU  funds,  and  to  preserve  nationally 
financed investment. Expenditure financed by Recovery and Resilience Facility grants 
and other EU funds is projected to amount to 1.9% of GDP in 2023, while nationally 
financed investment is projected to provide an expansionary contribution to the fiscal 
stance of 0.1 percentage points.20  

(21)  According to the Convergence Programme the general government deficit is expected 
to  decline  to  4.7%  of  GDP  in  2024.  The  decrease  in  2024  mainly  reflects  higher 
revenue  from  the  EU  and  the  phase-out  of  the  energy  support  measures.  The 
programme expects the general government debt-to-GDP ratio to increase to 30.7% at 
the end of 2024. Based on policy measures known at the cut-off date of the forecast, 
the Commission 2023 spring forecast projects a government deficit of 4.8% of GDP in 
2024.  This  is  broadly  in  line  with  the  deficit  projected  in  the  programme.  The 
Commission  2023  spring  forecast  projects  a  lower  general  government  debt-to-GDP 
ratio, of 28.1% at the end of 2024. 

(22)  The Convergence Programme envisages the phasing out of most of the energy support 
measures  by  2024.  The  Commission  currently  assumes  net  cost  of  energy  support 
measures  of  0.1%  of  GDP  in  2024,  compared  to  0.8%  of  GDP  in  2023.  These 
estimates hinge upon the assumption of no renewed energy price increases. The energy 
support measures that are currently planned to remain in place in 2024 do not appear 
targeted to vulnerable households or firms. They do not fully preserve the price signal 
to reduce energy demand and increase energy efficiency. 

(23)  Council Regulation (EC) No 1466/97 calls for an annual improvement in the structural 
budget balance toward the medium-term objective by 0.5% of GDP as a benchmark.21 
Taking into account fiscal sustainability considerations,22 the need to reduce the deficit 
to below the 3% of GDP reference value, an improvement in the structural balance of 
at  least  0.5%  of  GDP  would  be  appropriate.  To  ensure  such  an  improvement,  the 

20 

21 

22 

Other nationally financed capital expenditure is projected to provide a contractionary contribution of 0.1 
percentage points of GDP.  
Cf. Article 5 of Council Regulation (EC) No 1466/97, which also requires an adjustment of  more than 
0.5%  of  GDP  for  Member  States  with  a  government  debt  exceeding  60%  of  GDP,  or  with  more 
pronounced debt sustainability risks. 
The  Commission  estimated  that  Bulgaria  would  need  an  average  annual  increase  in  the  structural 
primary  balance  as  a  share  of  GDP  of  0 percentage  points  to  achieve  a  plausible  debt  reduction  or 
ensure that government debt is kept at prudent levels in the medium term.  This estimate was based on 
the  Commission  autumn  2022  forecast.  The  starting  point  for  this  estimate  was  the  projected 
government  deficit  and  debt  for  2024  which  assumed  the  withdrawal  of  energy  support  measures  in 
2024.  

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growth  in  net  nationally  financed  primary  expenditure23  in  2024  should  not  exceed 
4.6%,  as  reflected  in  this  recommendation.  At  the  same  time,  the  remaining  energy 
support  measures  (currently  estimated  by  the  Commission  at  0.8%  of  GDP  in  2023) 
should be phased out, contingent on energy market developments and starting from the 
least targeted ones, and the related savings should be used to  reduce the government 
deficit.  Based  on  Commission  estimates,  this  would  lead  to  a  growth  in  net  primary 
expenditure  below  the  recommended  maximum  growth  rate  for  2024.  In  addition, 
according  to  the  Commission  2023  spring  forecast,  the  growth  in  net  nationally 
financed primary current expenditure in 2023 is not in line with the recommendation 
of the Council. If this is confirmed, lower growth in net primary expenditure in 2024 
would be appropriate. 

(24)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 
nationally financed primary expenditure to grow at 5.4% in 2024, which is above the 
recommended  growth  rate.  The  adjustment  projected  in  the  Commission  forecast  is 
less  than  the  savings  from  the  full  phasing  out  of  energy  support  measures  which  is 
mainly  due  to  the  annualised  impact  of  pension  increases  and  planned  increases  in 
some public sector wages that more than offset the positive impact of the phasing out 
of energy support measures. 

(25)  According to the programme, government investment is expected to increase from 4% 
of  GDP  in  2023  to  4.6%  of  GDP  in  2024.  The  higher  investment  reflects  higher 
nationally  financed  investment  and  investment  financed  by  the  EU,  namely  through 
the Recovery and Resilience Facility. 

(26)  The  Convergence  Programme  outlines  a  medium-term  fiscal  path  until  2026. 
According to the programme, the general government deficit is expected to increase to 
4.9% of GDP in 2025 and to 5% by 2026. The general government deficit is therefore 
not planned to return to below 3% of GDP over the programme horizon. According to 
the  programme,  the  general  government  debt-to-GDP  ratio  is  expected  to  increase 
from 30.7% at the end of 2024 to 37.1% by the end of 2026. 

(27) 

In accordance with Article 19(3), point (b) and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. The implementation 
of Bulgaria’s recovery and resilience plan is underway, however with  increasing risk 
of delays. Bulgaria submitted 1 payment request, corresponding to 22 milestones and 
targets  in  the  plan  and  resulting  in  an  overall  disbursement  of  EUR  1.37  billion.  A 
high  level  of  governmental  instability  has  led  to  delays  on  key  legislative  reforms, 
such  as  those  on  public  procurement,  anti-corruption,  and  the  accountability  of  the 
prosecutor-general.  Lack  of  political  stability  and  administrative  capacity  also 
translated  into  a  slowdown  in  the  implementation  work  on  several  important  energy 
and transport investments and the questioning of key  aspects of the plan, namely on 
decarbonisation  of  the  energy  sector.  The  second  payment  request  has  been  delayed 
and  is  now  planned  for  September  2023.  However,  there  is  a  significant  risk  that 
several milestones and targets related to key reforms will not be fulfilled at the time of 
submission.  Work  on  the  addendum  of  the  plan  and  the  REPowerEU  chapter  is 
ongoing. The timeline for the  finalisation of this work is  still unclear because of the 
political situation. The swift inclusion of the new REPowerEU chapter in the recovery 

23 

Net  primary  expenditure  is  defined  as  nationally  financed  expenditure  net  of  discretionary  revenues 
measures and excluding interest expenditure as well as cyclical unemployment expenditure. 

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and  resilience  plan  will  allow  additional  reforms  and  investments  to  be  financed  in 
support  of  Bulgaria’s  strategic  objectives  in  the  field  of  energy  and  the  green 
transition. The systematic and effective involvement of local and regional authorities, 
social  partners  and  other  relevant  stakeholders  remains  important  for  the  successful 
implementation  of  the  recovery  and  resilience  plan,  as  well  as  other  economic  and 
employment policies going beyond the plan, to ensure broad ownership of the overall 
policy agenda.  

(28)  The Commission approved all of Bulgaria’s cohesion policy programming documents 
in  2022  apart  from  the  Just  Transition  Fund  priority  and  Territorial  Just  Transition 
Plans,  which  are  crucial  to  alleviate  the  impact  of  the  transition  of  coal  regions. 
Proceeding  with  their  adoption  as  well  as  the  swift  implementation  of  the  cohesion 
policy programmes in  complementarity and synergy with the recovery and resilience 
plan,  including  the  REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital 
transition,  increasing  economic  and  social  resilience  as  well  as  achieving  balanced 
territorial development in Bulgaria.   

(29)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan, Bulgaria faces a number of additional challenges related to the decarbonisation 
of the economy and the transition to clean energy production.  

(30)  Bulgaria  continues  to  have  the  most  carbon-intensive  economy  in  the  EU,  with 
greenhouse gas intensity more than four times higher than the EU average. The 2021 
share of fossil fuels in  Bulgaria’s energy mix was 63%, with  coal representing 26%, 
nuclear  22%  and  renewables  15%  (lower  than  the  EU  renewables  average  of  18%). 
The  Bulgarian  recovery  and  resilience  plan  includes  a  reform  of  the  strategic 
framework for decarbonisation of the economy, in particular of the energy sector. This 
includes the preparation of scenarios and recommendations by the Energy Transition 
Commission and the subsequent adoption of a roadmap towards climate neutrality by 
the National  Assembly,  with  a final  date for phasing out  coal/lignite, at  the latest  by 
2038.  Although  the  Energy  Transition  Commission  was  established  in  2022,  its 
recommendation report has been delayed. Moreover, the National Assembly adopted a 
resolution  in  January  2023  obliging  the  government  to  renegotiate  Bulgaria’s 
decarbonisation commitments, including an investment in electricity storage, under its 
recovery and resilience plan.   

(31)  Bulgaria  has  shown a high level  of security  of  gas supply  in  the  face of  challenging 
circumstances,  in  particular  its  gas  supplies  from  Russia  being  cut  shortly  after  the 
invasion  of  Ukraine.  Bulgaria  was  able  to  secure  short-term  contracts  for  liquified 
natural gas (LNG) deliveries via Greece. The gas interconnector between Greece and 
Bulgaria  (IGB)  started  operations  in  October  2022.  This  enabled  Bulgaria  to  receive 
the full volumes of contracted supplies from Azerbaijan (1 bcm/year, covering roughly 
30% of domestic consumption). The share of gas in the energy mix was 14%, lower 
than the EU average of 23%. Industry remains the largest gas consumer, with a share 
of  42%,  including  non-energy  uses.  District  heating  systems  in  the  major  towns  of 
Sofia  and  Plovdiv  rely  on  natural  gas,  accounting  for  approximately  a  third  of 
Bulgaria’s  total  natural  gas  consumption.  Bulgaria’s  consumption  of  natural  gas  has 
dropped by 22% in the period between August 2022 and March 2023, compared with 
the  average  gas  consumption  over  the  same  period  in  the  preceding  5  years,  beyond 

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the  15%  reduction  target.  Bulgaria  is  encouraged  to  keep  pursuing  efforts  to 
temporarily reduce gas demand until 31 March 202424. 

(32)  On renewables, Bulgaria is  yet  to  remove the barriers to  installing renewable energy 
facilities  and  connecting  them  to  the  grid,  part  of  a  commitment  under  the  recovery 
and resilience plan. In January 2023, the Commission referred Bulgaria to the Court of 
Justice  of  the  European  Union,  in  accordance  with  Article  260(3)  Treaty  on  the 
Functioning  of  the  European  Union,  for  failing  to  incorporate  the  EU  Renewable 
Energy  Directive  into  national  law.  Greater  focus  on  energy  storage  would  help 
accelerate  the  deployment  of  grid-scale  renewables  in  Bulgaria.  Furthermore, 
improving grid management to make it more flexible could facilitate the integration of 
additional renewable energy installations. At the same time, Bulgaria should continue 
developing  energy  interconnectors  with  sufficient  capacity  with  neighbouring 
countries.  Investment  into fossil fuel  infrastructure needs to  be limited to  the strictly 
necessary and be designed to  be future-proof, to avoid  lock-in  into technologies that 
are  not  consistent  with  the  climate  objectives  or  increasing  the  cost  of  the  energy 
transition. 

(33)  The Bulgarian recovery and resilience plan includes over EUR 1 billion of investments 
aimed at improving energy efficiency in both public and private buildings, with calls 
to  deliver  projects  on  the  ground  being  put  into  action.  The  establishment  of  the 
national  decarbonisation  fund,  expected  in  2023,  is  crucial  for  the  achievement  of 
Bulgaria’s long-term strategy to renovate its building stock, along with attracting more 
private  investment  by  adapting  its  approach  to  renovation  programmes.  Additional 
effort is needed to structurally address energy poverty, in particular through dedicated 
schemes and technical and administrative assistance to reflect the needs of vulnerable 
groups. For Bulgaria to be in line with the ‘Fit for 55’ objectives, greater ambition will 
be  needed  to  reduce  greenhouse  gas  emissions  and  increase  renewables  and  energy 
efficiency targets. 

(34)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating  bottlenecks  in  the  transition  to  a  net-zero  economy.  High-quality  education 
and  training  systems  that  respond  to  changing  labour  market  needs,  and  targeted 
upskilling and reskilling measures are key to reducing skills shortages and promoting 
labour inclusion and reallocation.  To unlock untapped labour supply, these measures 
need to be accessible, in particular for individuals, sectors and regions most affected 
by  the  green  transition.  In  2022,  labour  shortages  were  reported  in  Bulgaria  for  a 
number  of  occupations  that  required  specific  skills  or  knowledge  for  the  green 
transition25. The European Social Fund Plus allocated EUR 152 million for measures 
to  promote  green  skills  and  jobs  for  2021-2027.  The  Just  Transition  Fund  also 
provides an opportunity to address the social dimension of the green transition for the 
three eligible regions in the country. 

(35) 

In  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2023 
Convergence  Programme  and  its  opinion26  is  reflected  in  recommendations  (1),  (2) 
and (3) below.  

24 
25 
26 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706 
Labour shortages report 2022 – European Labour Authority. 
Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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(36)  Since  2005,  by  2021,  greenhouse  gas  emissions  from  domestic  transport  except 
aviation  have  grown  by  19.5  %  in  Bulgaria,  while  declining  by  7.5  %  in  the  EU  on 
average.  About  a  quarter  of  the  country’s  greenhouse  gas  emissions  are  provided  by 
this  sector.  The  uptake  of  zero-emission  passenger  cars  is  low,  as  is  the  density  of 
public electric charging points in Bulgaria. The development of the Bulgarian section 
of  the  Trans-European  Transport  Network  has  been  facing  delays,  especially 
concerning rail infrastructure: this inhibits multimodality and the potential to improve 
efficiency and sustainability in transport. Air pollution constitutes a significant health 
risk to the Bulgaria’s population.  

HEREBY RECOMMENDS that Bulgaria take action in 2023 and 2024 to:  

1. 

2. 

3. 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023  using  the 
related  savings  to  reduce  the  government  deficit.  Should  renewed  energy  price 
increases  necessitate  support  measures,  ensure  that  these  are  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings.  

Ensure  prudent  fiscal  policy,  in  particular  by  limiting  the  nominal  increase  in 
nationally financed net primary expenditure in 2024 to not more than 4.6%. 

Preserve nationally financed public investment and ensure the effective absorption of 
RRF  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  

For  the  period  beyond  2024,  continue  to  pursue  a  medium-term  fiscal  strategy  of 
gradual  and  sustainable  consolidation,  combined  with  investments  and  reforms 
conducive  to  higher  sustainable  growth,  to  achieve  a  prudent  medium-term  fiscal 
position.  

Ensure an effective  governance structure and strengthen the administrative capacity 
to  allow  for  a  swift  and  steady  implementation  of  its  recovery  and  resilience  plan. 
Swiftly  finalise  the  REPowerEU  chapter  with  a  view  to  rapidly  starting  its 
implementation.  Proceed  with  the  speedy  implementation  of  cohesion  policy 
programmes, in close complementarity and synergy with the recovery and resilience 
plan. 

Reduce  reliance  on  fossil  fuels  and  accelerate  the  clean  energy  transition  through 
faster  deployment  of  renewable  energy  sources,  together  with  storage  capacities  to 
increase  the  flexibility  of  the  energy  system.  Strengthen  the  electricity  grid 
infrastructure  and  improve  its  management  by  streamlining  the  connection 
procedures  and  introducing  smart  grid  elements.  Continue  efforts  to  increase 
interconnection  with  neighbouring  countries.  Accelerate  building  renovation  to 
incentivise energy efficiency and address energy poverty. Promote new future-proof 
solutions  in  district  heating  and  sustainable  urban  transport  as  well  as  accelerate 
development of railway infrastructure. Step up policy efforts aimed at the provision 
and acquisition of the skills needed for the green transition. 

Done at Brussels, 

For the Council 
The President 

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