Country Report Bulgaria February 2009

Outlook for 2009-10

• Relations between the Bulgarian Socialist Party (BSP) and its partner in the ruling coalition, the centrist National Movement for Stability and Progress (NMSP), are likely to stay problematic until the next election, due in mid-2009.
• Citizens for European Development of Bulgaria (CEDB), currently the main opposition party, looks set to lead the government after the next election.
• A CEDB-led government is unlikely to make any radical changes in economic policy, but will try to crack down on organised crime and corruption.
• The EU will keep Bulgaria under close scrutiny, continuing to demand judicial reforms and more tangible results in the fight against corruption and organised crime.
• Real GDP growth is forecast to slow from an estimated 5.4% in 2008 to -0.6% in 2009, mainly because of the worsening outlook for access to finance. Risks remain of an even sharper slowdown if global conditions deteriorate further.
• Growth is forecast to rebound mildly, to 1.2%, in 2010.
• Headline inflation will start to come down from the high rates seen in 2008 as domestic demand pressures ease and owing to lower world oil prices. Inflation is forecast to average 5.8% in 2009 and 4.3% in 2010.
• Owing to the expected significant slowdown in the growth of domestic demand, the Economist Intelligence Unit forecasts that the current-account deficit will narrow to 14.1% of GDP in 2009 and 10.8% of GDP in 2010.

Monthly review

• Public disaffection with the political climate expressed itself in January through a series of protests in the capital, Sofia.
• The police staged a symbolic protest to demand higher pay and better working conditions.
• The budget surplus for January-November was 6.9% of projected GDP for the year and gave the government room for additional spending in December.
• Bulgaria was without natural gas imports for two weeks during January owing to the dispute between Russia and Ukraine, forcing the state gas company to ration supplies, with detrimental effects for industrial production.
• The industrial sector experienced a fall in output of 8.8% year on year in November, the largest contraction since the series was introduced in 2001.
• The monthly trade deficit in November was down by 6.7% year on year, owing to the lower level of imports. However, the proportion of the current-account deficit covered by inflows of foreign direct investment decreased.

This report covers the following industry codes:
SIC Code: 70
NAICS Code: 72