Foreword of BNB Governor Dimitar Radev to the 2018OMFIF Global Public Investor[*], published on 23 May 2018
THE IMPORTANT JOURNEY TO EURO ACCESSION
Bulgaria must translate strong economic recovery into durable convergence
The joint themes of reform and transition run through this year’s OMFIF Global Public Investor. The international economy, after almost a decade of recovery from the 2008-09 crisis, may be approaching a turning point, while the world as a whole has to weather the changes wrought by the shifts in US foreign policy and the rise of China.
As a future member of the European single currency, Bulgaria is keenly interested in euro area reforms. Within this broader context, the completion of the banking union, for instance, is among the priorities of the Bulgarian presidency of the Council of the European Union in the first half of 2018.
At the same time, we are well aware that if we want Bulgaria to be a full-fledged participant in the reform process at the European level, we need to further deepen our own reform agenda. We need to translate our strong economic recovery into durable real convergence.
Indeed, Bulgaria’s macroeconomic performance is solid. Monetary stability has been in place for over two decades. The exchange rate is fixed to the euro and the currency board is uncompromised in both good and bad times, even during the 2008 financial crisis. Bulgaria keeps a broadly balanced budget and is reputed to have the third-lowest debt-to-GDP ratio in the EU. The banking sector is robust, with capital adequacy and liquidity exceeding the EU averages.
It is logical to expect that a country with such a record should not be blocked, but rather welcomed to start its journey towards joining the euro area through the participation of the lev, the national currency, in the exchange rate mechanismII.
The actual timing of euro adoption will depend less on the nominal Maastricht convergence criteria, which Bulgaria has been meeting broadly for many years, and more on the real convergence of the economy. There are structural and institutional policies that need to be implemented and consistently pursued, in order to speed up real convergence.
Thus the process of euro area accession, starting with the participation of the national currency in the ERM II, will be a catalyst for further improvements, adjustments and reforms. All of this will ultimately be beneficial for the economy, irrespective of whether we are in or still out. The journey is at least as important as reaching the final destination. The same holds true for many Global Public Investors that OMFIF highlights in this 2018 edition, which I am sure will fulfil its purpose of spreading better public investment practices worldwide.
Dimitar Radev is Governor of the Bulgarian National Bank.
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