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Bulgaria's economy set for full recovery in mid-2012 - UniCredit

Thursday, Dec 16, 2010

Bulgaria will likely fail to unleash its full economic potential before the middle of 2012, as individual consumption recovery will continue to be hampered by low domestic demand and high precautionary savings, according to UniCredit's latest CEE report.

The economists consider that the improvement third-quarter indicators chiefly mirrors a steady rebound in Bulgaria's manufacturing competitiveness. The growth in exports, however, will not be sufficient to rescue the rest of the economy, with individual consumption turning into the weak spot of the country's recovery.

Furthermore, adjustments in the number of jobs in some domestic demand-oriented sectors is still in place, which weighs on the pace of economic revival.

"The sharp contraction of individual consumption in the third quarter of 2010 highlights the household sector's need for more time to join the recovery," UniCredit Bulbank's chief economist, Kristofor Pavlov, said.

Although data on domestic demand-oriented sectors is less encouraging, employment in export-led segments is improving, implying that "roughly a third of the economy is out of the red zone," according to the analysts.

Furthermore, the pace of the economic recovery will also be curbed by structural reform delays, Pavlov said.

"Some investors seem confident that the toughest tests for the Greek recovery still lie ahead. This affects both the inflow of foreign capital and debt servicing costs for the Bulgarian economy," he said.

Meanwhile, growth prospects for the Bulgarian economy have been improving in recent months, which made UniCredit believe that the country's gross domestic product (GDP) will end in positive territory at the end of 2010. UniCredit estimated that Bulgaria will post a modest 0.1 per cent growth in GDP for the current year, which will improve to 2.8 per cent in 2011.

Source: thesofiaecho.com