Bulgaria's budget deficit this year will likely come in lower than the forecast 5.7% of GDP, says Lyubomir Datsov, a member of the Fiscal Council. If the government keeps a lid on spending, the figure could fall below 4% — and in the best case, even as low as 2.4%.

Datsov spoke at the "Future of Money" forum, held by Manager magazine at the Capital Fort business complex in Sofia. He praised the government for keeping wage and running costs in the public administration under control.

He said the draft 2027 budget is built on shaky ground: spending cuts add up to 750m euros, while new taxes on citizens come to 1.5bn euros.

As the economic cycle turns, the budget's revenue problem will get worse over the next two years, Datsov warned. Raising the main tax rates by two percentage points won't fix it, he said.

Bulgaria needs a plan for structural reform on two fronts, he said: shrink the size of public-sector bodies and make them work better. In his view, the public sector holds the biggest potential to boost the economy and growth.

"Sadly, right now there isn't a single such reform on the table in any sector," Datsov said.

As an example, he pointed to the ratio of public-sector workers to the population. In 2005, that ratio was close to the European average. To get back to that level now, Bulgaria would need to cut around 90,000 public-sector jobs.

Datsov also criticized the economy ministry and the agriculture ministry, saying that over the past three months they have done nothing but pile new red tape on legitimate businesses.

He hopes the finance ministry won't bring in a windfall tax. Such a one-off tax, he said, would raise doubts about whether Bulgaria might later switch from a flat tax to a progressive one. Picking out four sectors for extra tax on profits looks like groundwork for just such a change to the tax system, the Fiscal Council member said.