IIF Dashes Bulgaria's Government GDP Growth Estimates

Business » FINANCE | October 18, 2011, Tuesday // 12:40
Bulgaria: IIF Dashes Bulgaria's Government GDP Growth Estimates A man walks past graffiti, depicting the crisis as a lady in Bulgaria’s capital Sofia. Photo by Sofia Photo Agency

Bulgaria's economic growth until 2014 will be below the government's estimates due to the slow-down in the euro area and the weakened demand for exports from the country, the Washington D.C.-based Institute of International Finance said.

Bulgaria's gross domestic product (GDP) will slow down to 1.9% in 2011, 2.2% in 2012, 2.5% in 2013 and 3% in 2014, the institute said in a report.

"Assuming the sovereign-debt crisis in the Eurozone is resolved in an orderly manner, real GDP should increase roughly 2 percent both this year and next," according to the report. "A poor global growth outlook and increased risk aversion have greatly increased uncertainty. Even so, Bulgaria appears more resilient than many in the region."

"While the heavily export-dependent economy would undoubtedly be strongly affected by sustained output weakness in Europe, it appears much less vulnerable to shifts in market sentiment given its small government deficit and debt, current- account surpluses and the absence of large refinancing needs until 2013, when a billion Eurobond falls due," the IIF said.

Earlier this month Bulgaria's government sharply revised downwards its economic growth forecast for next year from 4,2% to 2,5%, citing the slow-down in Western Europe.

"My preliminary estimates for next year's growth are around 2.5%," Finance Minister Simeon Djankov said, adding that obviously the previous forecast for 4.2% was unrealistic given "the current events abroad".

Germany, Bulgaria's biggest trading partner, is recording a slow-down in its economic growth for the second quarter and has cut its forecast for the next one, the minister specified.

The Finance Ministry is expected to submit the budget draft for next year to the government next week. After the cabinet gives it the green light, it will be tabled for debates in parliament.

Driven by strong exports, as well as the good performance of the industry and services sectors, the Bulgarian economy has started to expand, but too weakly and unsteadily.

The economy expanded by 2% in the second quarter on an annual basis, down by 1.4% in comparison with the previous quarter, which marked the first considerable increase in economic growth since the country plunged into a recession. The seasonally adjusted GDP edged up by 0.3%.

The International Monetary Fund recently downgraded its forecast for the 2011 growth of the Bulgarian economy to 2.5% from a projected 3% estimate made at the beginning of the year.

Meanwhile the European bank for Reconstruction and Development (EBRD) lowered its annual economic growth forecast for Bulgaria from 3.1% to 2.3% in 2011.

All forecasts for the Bulgarian economy in 2011 are below the 3.6% growth projected by the Bulgarian government in its 2011 budget.

The government has set GDP growth for 2013 and 2014 at 4.4% and 4.2%, respectively.

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