Country Report Bulgaria November 2009

Summary

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 1%, 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 12.1% of GDP in 2009, and forecast that it will average about 9% of GDP in 2010-11.

The CEDB candidate for the mayoral election in Sofia, Iordanka Fandakova, looks set to win the contest; both the Blue Coalition and Ataka have indicated that they will support her rather than field their own candidates.
The government said that it will apply in February 2010 for entry into the EU's exchange-rate mechanism (ERM2), but there is likely to be some resistance by other member states to Bulgarian entry.
In September 2009 the appetite for government bonds increased sharply and the interest rates attached to these bonds dropped.
The banking system remained stable at the end of August, despite the rising trend in bad loans, but credit activity remained depressed.
In August the smallest year-on-year decline of industrial production was reported since December 2008, but retail trade showed no sign of strengthening, and the decline in construction output accelerated.
The current account posted a monthly surplus for the second month in a row in August, after deficits in the first half of the year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52