Bulgaria's real GDP, which contracted in 2009 and grew by an estimated 0.1% in 2010, is forecast to expand with an annual average growth of around 3.8% in 2011-15, according to the latest report of the Economist Intelligence Unit (EIU).

This year real GDP is expected to grow by 2.6%.

Annual inflation is forecast to increase to 3.3% in 2011 from an estimated 2.4% in 2010, before averaging around 3% in 2011-15, says the January Country report Updater for Bulgaria by The Economist's analytical unit.

In October the consolidated general government budget recorded a significant deficit, of Lv385m (US0m), which pushed up the accumulated deficit for the first ten months to Lv1.9bn (US.3bn), or 2.5% of estimated 2010 GDP.

Nevertheless, the CEDB is highly unlikely to breach its 2010 deficit target of 4.6% of GDP, the analysts say.

They expect that after narrowing dramatically in 2009-10, the current-account deficit will widen modestly in 2011-15.

Given Bulgaria's high level of external debt, as well as risks of fallout from the Greek crisis, there is a small possibility of Bulgaria requiring external assistance from the IMF and the EU, according to the analysts.

Vexed credit conditions will continue to constrain private consumption and capital spending, they say.

In the report, it is noted that after a resounding victory in the election in July 2009, Citizens for European Development of Bulgaria (CEDB) rules alone, despite the absence of a majority in parliament.

According to EIU increasing criticism from the Blue Coalition may make the CEDB reliant on the nationalist Ataka party for passing legislation in parliament.

The EU will demand more tangible results in the fight against corruption and organized crime.