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EC: Bulgaria Boosts Exports, GDP to Grow 2.6% in 2011

Tuesday, Nov 30, 2010

The main driving forces behind Bulgaria's economic turnaround in 2011 will include a continued strong export pick-up and replenishing of inventories, while domestic demand is expected to contract, according to the European Commission's spring economic forecast.

The year on year GDP growth in Bulgaria 2010 is expected by the EC to be -0.1%, while the expected figure for 2011 is 2.6%. This is less optimistic than the 3.6% expected by the Bulgarian government.

Despite the healthy export demand, Bulgaria's industrial output has remained at low levels. In addition, retail trade and construction are still depressed, while credit growth is only minimal, the forecast shows.

Net exports are expected to have been the main growth driver in 2010. Together with a build up inventories, these should almost compensate for the negative contribution of domestic demand in Bulgaria.

Indeed, in the first half of 2010, exports of goods to non-Euro-area and third countries were very high and close to their pre-crisis peaks, while exports of goods to some of the main EU trading partners such as Germany, Greece, and some other Member States in the region (i.e. Romania,Hungary and the Czech Republic) reached all-time highs.

As a result of exports picking up faster,earlier and stronger than imports, the current account deficit will continue to decline, reaching 3.25% of GDP in 2010.

By end-March 2010 the accumulated budget deficit in Bulgaria increased to 2.4% of the full-year GDP projection under the impact of lower tax revenue (as a result of the changing growth composition as well as higher VAT and excise tax refunds) and increased social expenditures.

In April-September, however, total expenditures decelerated and were 1.1% lower year on year at the end of the third quarter, while the contraction of total revenues gradually narrowed to 6.3% year on year.

The 2011 Bulgarian state budget, approved in November 2010 provides a deficit of a little under BGN 2 B, which is expected to be about 2,5% of the GDP, without factoring in any loans and contributions to the construction of Nabucco gas pipeline.

In June, the center-right Bulgarian cabinet revised the state budget increasing its 2010 target for deficit to 4.8% of GDP on a cash basis and 3.9% of GDP under EU accounting rules, far wider than initial estimates.

Full text of the European Commission's forecast can be read here.

Source: novinite.com