Profit.bg talked to Georgi Stoev, managing partner at Industry Watch, about the possibility of an economic recession in Bulgaria and about the effects of the worsened economic conditions in the European Union:

Mr. Stoev, until recently it was widely accepted that the financial crisis in the western countries will affect Bulgaria indirectly, rather than directly. Now that there is a possibility of a recession in the leading European countries, is there a direct threat for the Bulgarian economy and the forecast macroeconomic indicators?

There аre expectations that the economic growth in the euro area will slow down from 2.1% at present to 1.2% in 2009. This, however, will have a limited effect on Bulgaria.

Some exporters may feel a contraction in demand, but a contraction in the exports on a macroeconomic level could not be forecast.

When can we expect the negative consequences for Bulgaria from the recession of the European economy?

The most direct way for international influence in Bulgaria are the prices of assets – mainly real estate properties, but increasing often stocks as well. The capital market is already going through difficult times and real estate property prices have settled notably down. No one can forecast with certainty as to how much worse things can get.

Is it possible for the Bulgarian economy to slip into recession and are there any grounds for a similar scenario?

The risks for Bulgaria are mainly domestic. The lack of important reforms in the public sector and in the judiciary not only hinder growth but could also lead to a recession.