Country Report Bulgaria May 2009

Outlook for 2009-10

• Citizens for European Development of Bulgaria (CEDB), the main opposition party, looks set to lead the government after the election due in July 2009.
• The EU will keep Bulgaria under close scrutiny, continuing to demand judicial reforms, as well as concrete results against corruption and organised crime.
• Given Bulgaria's large external debt and current-account deficit, the Economist Intelligence Unit assumes that Bulgaria will require some measure of external financial assistance from the IMF and the EU.
• Real GDP growth is forecast to contract by 3.8% in 2009, following estimated growth of 6% in 2008, mainly because of limited access to external finance and a further worsening of the outlook for the euro zone.
• Growth is forecast to rebound modestly, to 0.7%, in 2010.
• Inflation will continue to trend down from the high rates seen in 2008, as domestic demand pressures ease, food inflation drops and world oil prices remain low. Inflation is forecast to average 3.5% in 2009 and 3.2% in 2010.
• Owing to a sharp contraction of domestic demand, we forecast that the current-account deficit will narrow to 13.9% of GDP in 2009 and to 9.8% of GDP in 2010, from 23.3% of GDP in 2008.

Monthly review

• The president of the European Commission, Jose Manuel Barroso, has rejected the request of the prime minister, Sergei Stanishev, for foreign experts from EU member states to play a greater role in helping Bulgaria to manage EU funds.
• Parliament has approved an amendment to the rules on the electoral threshold, which could influence the parliamentary election of mid-2009.
• The budget performed impressively in January, but deteriorated in February, a worrying indictor of the outlook for government finances in 2009.
• The banking system remains well capitalised and mildly profitable, but non-performing loans (NPLs) are starting to increase.
• Industrial production growth contracted by 18.4% year on year in January, and this was followed by a 17.7% fall in February.
• Retail trade turnover continued to weaken in February, posting a decline of 6.4% year on year.
• In February the contraction of the trade and current-account deficits intensified, but the balance of payments deteriorated.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;49;60
NAICS Code: 517;22;52