SOFIA, Dec 14 (Reuters) - Bulgaria needs to focus on education and training and overhaul its judiciary to narrow the gap with wealthier Western European nations, the International Monetary Fund (IMF) said on Thursday.
The small and open economy grew by 3.9 percent last year and the IMF sees it expanding by 3.8 percent in 2017 and 2018, said Jorg Decressin, deputy director of the IMF’s European Department and head of the IMF mission to Bulgaria.
“The economy is performing well... The current account is in a large surplus, helped by a competitive external sector and external debt has been brought down sharply. Fiscal policy has been conservative,” Decressin told a news conference.
“All this is good news. However, there is still a long way to go in terms of income catch up with EU levels,” he said.
Bulgaria, which joined the European Union in 2007, is pushing for an entry into the ERM-2 mechanism, the two-year obligatory precursor to the euro zone and has been backed by European Commission President Jean-Claude Juncker.
Sofia, which pegs its lev currency to the euro, meets the formal criteria to adopt the single currency, but diplomats and bankers say low incomes and rampant corruption are the main obstacles to it entering the euro zone.
When calculated at power purchasing parity, Bulgarian GDP per capita stands at 49 percent of the EU’s average and is the lowest in the bloc.
The IMF backs the government’s plan to raise teachers’ pay and focus on education, Decressin said, adding that investing in human capital, fighting corruption and streamlining the judiciary were critical to catching up with richer EU peers.
Decressin said these reforms, along with improvements of ailing healthcare, better management of state-owned companies would also help Bulgaria be a successful member of the euro area.
“Bulgaria is contemplating to join the ERM-2 and the idea is to make good on the country’s commitment, which is to join the euro area,” he said. “Many of the reforms that we are proposing should be helpful in ensuring Bulgaria’s successful participation in the euro.” (Reporting by Tsvetelia Tsolova, Editing by William Maclean)