Country Report Bulgaria January 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, although this is unlikely to produce any significant shifts in economic policy.
• 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 6% in 2008 to 0.8% in 2009 and to 2% in 2010, owing to the worsening outlook for access to finance. Risks remain of a sharper slowdown if global conditions deteriorate further.
• Headline inflation will start to come down from the high rates seen in 2008 as domestic demand pressures ease. Inflation is forecast to average 6.7% 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 17.6% of GDP in 2009 and to 11.6% of GDP in 2010.

Monthly review

• The EU has cancelled 220m (US$322m) of funds under the Phare programme and has refused to unfreeze a further 300m. This is because of insufficient reform of two agencies distributing the funds.
• Approval ratings for leading political figures in the ruling coalition and in the opposition have deteriorated, according to a December survey.
• For the first ten months of 2008 the budget surplus was Lv5bn (US$3.7bn), or 7.5% of expected GDP for 2008.
• From December 1st the Bulgarian National Bank (BNB, the central bank) decided to reduce the minimum reserve requirement of banks from 12% to 10% in order to boost liquidity.
• Real GDP growth was 6.8% in the third quarter, but in October industrial production fell by 1.9% year on year, and other indicators suggest that the economy is starting to suffer the effects of the global economic crisis.
• Inflation has continued on a downward trend, falling from 10.9% year on year in October to 9.1% in November.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;37;65
NAICS Code: 52;336;53