A Bulgarian think-tank has forecast a return to economic growth this year, in line with the government's latest figures, which reversed a previous forecast for a 2% contraction

Bulgaria's economy is poised to expand by 0,5% -1% this year, according to the Center for Economic Development.

Unemployment has been set at 10% by the end of the year.

In the budget for this year, the economists expect a deficit during the first months of the year, but say it will be brought down to zero in the middle of the year.

Earlier in the week Finance Minister Simeon Djankov said the growth will reach 0,3% in 2010, helped by the centre-right government's prudent fiscal policy and measures to raise budget revenues by cracking down on smuggling.

In its budget for this year, the government has penciled in a deficit of 0.7%, the lowest in the European Union.

Last week the European Bank for Reconstruction and Development (EBRD) revised upwards its 2010 growth forecast for a number of countries, including Bulgaria.

The prognosis for Bulgaria was upped to a 0% growth of GDP from a forecast drop of 1.5%, but the bank warned that the recovery is likely to be slowed by the fiscal tightening.

It is also expected that in the last quarter of 2010 Bulgarian economy will register 0.7% growth compared to the same period the previous year.

Bulgaria sank deeper into recession in the third quarter of last year, its economy contracting 5,8% y/y, following a 4,9 % y/y drop in the second quarter of 2009.