Bulgaria's real GDP growth is forecast to contract by 5,3% in 2009, following estimated growth of 6% in 2008, according to the latest forecast of the Economist Intelligence Unit (EIU).

This will be mainly because of limited access to external finance and the poor economic outlook for the Eurozone. Growth is forecast to rebound weakly, to 0,4%, in 2010.

Inflation will continue to trend down from the high rate in 2008 as domestic demand pressures ease, food inflation drops and world oil prices remain low relative to 2008. Inflation is forecast to average 3,2% in 2009 and 3% in 2010.

Owing to a sharp contraction in domestic demand, EIU analysts forecast that the current-account deficit will diminish from 25% of GDP in 2008 to about 12% of GDP in 2009 and just below 10% in 2010.

The Economist's analytical unit comments that decision of the center-right Citizens for European Development of Bulgaria (CEDB) to govern alone despite lacking a majority presents some risk to political stability.

They expect the EU to keep Bulgaria under close scrutiny, continuing to demand judicial reforms, as well as concrete results against corruption and organized crime.

Given its large external debt and current-account deficit, Bulgaria is expected to require some financial assistance from the IMF and the EU.

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