Economy & Business, Volume 13, 2019

Abstract: The necessity of government participation in the economy, as well as the limits of such participation are the object of theoretical and empirical economic research. The debate concerning public revenue share in Gross Domestic Product has a long history. Another question that exists is as follows: is budget deficit or surplus able to maintain a balance between economic stability and social equity and which one (budget deficit or surplus) is going to induce higher real economic growth. The necessity of active participation of the government in the economy and the use of budget balance as a fiscal instrument for economic regulation is even more tangible. The economic growth in global, regional and national aspect over the last years has been slow. This fact presents a real challenge concerning the stability of the public budget. In the present research, the object of analysis is budget balance, and its subject – the effect of public budget deficit/ surplus on real economic growth. The main goal is to evaluate budget deficit/ surplus impact on real economic growth using econometric analysis and comparative analysis between Bulgaria and the other new Member States of the European Union (Cyprus, The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, Romania, and Croatia, accepted in the EU during 2015.) as well as the Balkan States (Serbia, Turkey, Greece, North Macedonia). The purpose is to justify the necessity of balancing the public budget and of reducing budget deficit to the level ensuring sustainable economic growth.