IMF: Bulgaria Economy Faces Head-Spinning Decline

Business » FINANCE | July 9, 2009, Thursday // 11:07
Bulgaria: IMF: Bulgaria Economy Faces Head-Spinning Decline The head of IMF Mission to Bulgaria Bas Bakker told Deutsche Welle that the latest forecasts are much gloomier than the figures previously published. Photo by BGNES

The International Monetary Fund expects the Bulgarian economy to shrink by 7% in 2009 and another 2,5% the next year, the head of the global lender mission to Bulgaria said.

Bas Bakker told Deutsche Welle that the latest forecasts beat considerably the figures previously published and come amid new analyses for the world economy.

The IMF now forecasts global growth of 2.5% next year, up from 1.9% in April, led by strong growth in China and India, a rebound in Japan and positive but sub-trend growth in the US.

It upgraded its forecasts for Europe too, but still expects the eurozone to contract 0.3% next year, with Germany declining 0.6%.

Bulgaria, the European Union's poorest member, has already entered recession with its economy shrinking 5% from January to March and contracting 1.6% in the fourth quarter on a quarterly basis.

Bulgaria's gross domestic product (GDP) contracted by 3,5% in the first quarter of 2009 on an annual basis, the first time that the country's GDP marked a drop year-on-year since the financial and economic crisis in 1997.

Bulgaria currently operates in currency board regime and the lev is pegged to the euro.

The opposition party of Sofia Mayor Boyko Borisov, which won by far the most votes in the recent general elections, advocates taking a loan from the IMF and World Bank, similar to those given to Latvia, Romania, Hungary and Ukraine, to support Bulgaria's currency peg to the euro, a move the defeated Socialist-led government rejected.

Economists have warned that Bulgaria's next government faces a deepening recession and an imminent loan agreement with the International Monetary Fund.

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