Country Report Bulgaria December 2009

Outlook for 2010-11

• Citizens for European Development of Bulgaria (CEDB) will continue to govern alone, despite lacking a parliamentary majority. This should increase government effectiveness, but presents some risk to political stability.
• The EU will keep Bulgaria under close scrutiny, continuing to demand judicial reform, and results from efforts to combat corruption and crime.
• Given its large external debt and current-account deficit, there is an ongoing risk that Bulgaria will require some financial assistance from the IMF and the EU, although this risk has diminished in recent months.
• Real GDP is estimated to have contracted by 5.3% in 2009, because of limited external finance and the poor economic performance of the euro zone.
• Growth is forecast to rebound weakly, to 0.6%, in 2010, before trending up to 3.4% in 2011 as both private consumption and investment begin to grow again more strongly.
• Annual inflation is estimated at 2.7% in 2009 and is forecast to average 2.3% in 2010-11 as world oil prices remain relatively low and domestic demand recovers only slowly from the economic crisis.
• Owing to a sharp contraction in domestic demand, we estimate that the current-account deficit narrowed from 25.2% of GDP in 2008 to 10.9% of GDP in 2009, and forecast that it will average about 7.7% of GDP in 2010-11.

Monthly review

• Public support for the CEDB remains high. It is especially high for the prime minister, Boiko Borisov.
• In October the consolidated state budget returned a small surplus, of Lv8m (US$6.1m), after monthly deficits since April 2009.
• According to the 2010 draft budget, the overall consolidated budget is planned to return a deficit equivalent to 0.7% of GDP.
• In the third quarter of 2009 the year-on-year contraction in real GDP steepened to 5.8%, compared with a drop of 4.9% in the second quarter and 3.5% in the first quarter.
• Both industrial output and the volume of retail sales increased slightly month on month in September. However, construction output continued to deteriorate and consumer confidence decreased.
• In September, for the third month in a row, the current account recorded a surplus, albeit a meagre Lv48m. The balance of payments in September also recorded a surplus.

This report covers the following industry codes:
SIC Code: 60;47;2834;39
NAICS Code: 52;48;3254;31

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: Life satisfaction 20 years after transition is ambivalent
• The political scene: Strong support for the government persists
• Economic policy: The monthly budget is in surplus in October
• Economic policy: Parliament approves the government's 2010 budget
• Economic performance: Real GDP drops by 5.8% year on year in the third quarter
• Economic performance: Economic activity remains very subdued in September
• Economic performance: Quality of life index: Bulgaria
• Economic performance: The current account records another monthly surplus
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure