Bulgaria Business Forecast Report Q2 2008

Publication Date	February 2008
Publisher	Business Monitor
Product Type	Report
Pages	60
ISBN Number	1744-8816
Product Code	BMI00277

Buy this product or for assistance call +44 20 7060 7474

PDF £375.00$624 | €420

FAX Order above formats by FAX

Summary

External Accounts Threaten Stability Despite our positive view for improving macroeconomic fundamentals in the long-term, we believe that there are two significant risks which threaten economic stability in Bulgaria going forward.

First, the current account descended further into the red during 2007, mainly due to a deteriorating trade balance. The current account deficit is expected to reach 19.4% of GDP in 2007 and remain at a similar level in 2008. Second, Bulgaria's external debt pile has continued to tick upwards during 2007, reaching 95.6% of GDP in October. Bulgaria performs poorly on a regional basis, with Macedonia, Romania and Serbia all reporting lower debt-GDP ratios. In light of the ongoing fallout of the US subprime market and tighter international credit markets, both a high current account deficit and debt-GDP ratio may become harder to sustain going forward, and present a significant risk to Bulgaria's macroeconomic stability.

We believe that the already declining support for the ruling Bulgarian Socialist Party will fall further, owing to the likely failure to agree to substantial public sector pay increases in 2008. Indeed, the ongoing pay disputes which have plagued Bulgaria's public sector in 2007, are likely to remain unabated in 2008. Bulgaria's nurses may potentially strike following their organised rally on December 13, with demands for minimum pay to double to BGN440 per month. In addition, the Bulgarian Doctors Union has called for a strike on January 21 of all hospitals by all physicians. The government will find it hard to accept these deals since doing so may spur already high domestic inflation, while failing to do so will further damage its reputation among Bulgarian voters who feel their standards of living have not significantly improved since the BSP came to power.

The fiscal budget continued to record a surplus in 2007, as a result of the outperformance in tax collection and tight fiscal spending. The government has stated that it will target a surplus of 3.0% of GDP in 2008, compared to the 3.5% targeted throughout 2007. However, we believe that as a result of politically motivated spending ahead of the 2009 general elections, there is scope for the fiscal surplus to come down further during 2008. We believe that a loosening of fiscal policy in 2008 could stimulate higher inflation, and in turn, reduce Bulgaria's prospects for joining ERM-2.

Despite the likelihood of a moderation in price growth by H208 (as a result of the seasonal impact of food inflation tapering off), we believe that inflationary pressures will remain a persistent threat to the Bulgarian economy. Principal factors include robust wage growth on the back of a progressively tightening labour market, in turn underpinned by solid economic expansion (averaging 5.2% over our five-year forecast period). We project a further decline in unemployment over the medium term, with our end-2008 forecast standing at 6.0%, falling further to 5.5% by 2012. Despite the slowing reduction in unemployment over our forecast period, the labour market will remain tight, keeping upward pressure on wages going forward.

Content

Executive Summary
External Accounts Threaten Stability
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
A Tough Year Ahead For BSP
We believe that as a result of declining support for the ruling Bulgarian Socialist Party, the Citizens for European
Development of Bulgaria (GERB) are likely to continue widening their lead in the opinion polls, ahead of the 2009
general elections.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth To Moderate In 2008
Despite the slowdown in economic growth during Q3, we believe that on the back of strong consumption and
investment growth, real GDP will grow at a still healthy 5.8% in 2008.
Balance Of Payments
Current Account Will Continue Seeing Red
We believe that an improvement of Bulgaria's external position over the medium term as a result of growth in the
export sector, will help rein in the current account deficit.
Industrial Production
Industrial Production Growth To Stay Strong
We believe that Bulgarian industrial production will continue to report strong growth in 2008, as a result of
ongoing robust external demand, greenfield investment and strong domestic consumption growth.
Fiscal Policy
A Solid But Uninspiring Budget
The headline numbers from the 2008 budget which passed through the Bulgarian parliament on December
are solid, if rather uninspiring.
External Debt
External Debt Growth To Slow
Bulgaria's total external debt continued to pile up in October, supporting our view that nominal debt will expand
further over the medium term.
Economic Ratings
Still Room For Improvement
Due to Bulgaria's favourable macroeconomic conditions and a significant degree of stability, our long-term
economic risk score is a relatively healthy 62.3.
Business Monitor International Ltd
bulgaria Q2 2008
Chapter 3: Special Report
Looking Beyond 2008
US: The Rebalancing Act
Unwinding The Imbalances
We believe that a substantial, multi-year shift in the US external accounts is under way. A weak US dollar and
subdued domestic consumption should lead to a narrowing in the US's structural current account deficit.
China: What If We're All Wrong?
Our Core Scenario For China
We are retaining our positive headline growth projections for China across the forecast period to 2012, with
our expectations of the continued success of the urbanisation process and export-driven growth model
underpinning our assumptions
Japan: Immigration Key To Long-Term Growth
Demographic Woes Portend Long-Term Decline
Immigration remains the only realistic way that Japan can overcome its long-term economic challenges.
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook - Q2 2008
Institutions
Infrastructure
Market Orientation
Tax Regime
Chapter 5: Key Sectors
Infrastructure
Executive Summary
Industry Trends And Developments
Market Overview
The Bulgarian construction industry is at a critical juncture, with prospects for double-digit growth amid r
estructuring and a buoyant economy proving good news for market players and foreign investors.
Pharmaceuticals & Healthcare Forecast
Executive Summary
Bulgaria's pharmaceutical market growth remains susceptible to shocks caused by domestic funding problems.
List of Tables
- Table: Bulgaria Cabinet And Other Key Posts (As Of January 2008)
- Table: Economic Activity
- Table: Balance Of Payments (Euro)
- Table: Fiscal Policy
- Table: Foreign Debt
- Table: BMI Business And Operational Risk Ratings
- Table: BMI Legal Framework Ratings
- Table: Bulgaria FDI Inflows
- Table: BMI Trade Ratings
- Table: Top Export Destinations
- Table: Top Import Sources
- Table: Bulgaria - Economic And Construction Data
- Table: Drug Market Indicators
- Table: Health Expenditure Indicators

Delivery Details

PDF:Immediate delivery

Ask a question about this product

Need help finding the right product?

Product features / use

Scope	Expert Insight/Opinion
Level	General Industry Strategies
Data	Detailed Market Forecasts
Profiles	Profiles of Key Companies
Features	Contains SWOT Analysis
Extra Info	Consumer Trends Highlighted