Bulgaria's gross domestic product (GDP) has contracted by 3,5% in the first quarter of 2009 on an annual basis, the statistics office announced on Wednesday, confirming flash data released last month.

The new data showed that the European Union newcomer has entered recession with its economy shrinking 5% from January to March and contracting 1.6% in the fourth quarter on a quarterly basis.

This is the first time that the country's GDP marks a drop on an annual basis since the financial and economic crisis in 1997 and the slump is much sharper than macroeconomists' forecasts. The data is being followed extremely carefully by analysts in a bid to track down the impact of the global economic crisis on the country.

The drop in GDP is the first tangible proof that Bulgaria has been hit by the crisis, whose impact has been measured so far in terms of the amount of foreign investments, industrial output, trade and incomes.

Bulgaria's exports and imports shrank by almost one third in the first quarter of 2009 on an annual basis in the wake of the global financial and economic crisis. Exports shrank 17.4% year-on-year in the first quarter, while imports contracted by 21.1%.

The data showed consumption came down on an annual basis by 5.4% in the first quarter, industry shrank 12.4% for the same period, while services' growth slowed to 2.5% from a 3.8 % increase in the fourth quarter of 2008.

Investments decreased by 14.1 % in January-March, compared with a 15.8 % growth in the fourth quarter of last year.

"Bulgaria's economy has entered recession and it will not rebound for at least one more quarter," Petar Ganev from the Institute for Market Economy, a Sofia-based think-tank, commented for Darik Radio.

"The succession of two quarters with a drop in GDP is a irrefutable proof of a period of recession. The situation is exacerbated by the slight rise in the unemployment rate and the languid demand on the real estate market. All these make us definitely say that Bulgaria's economy has entered recession," Ganev explained.

According to him the recovery will depend hugely not only on external factors, but also on the policy of Bulgaria's next government.

Last month the European Bank for Reconstruction and Development (EBRD) became the latest addition to the club of institutions forecasting a contraction of Bulgaria's economy in 2009.

The bank estimated that Bulgaria's GDP growth will shrink by 3% this year and a further 1% in 2010, echoing predictions made by the European Commission.

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