Recession Deepens in Bulgaria in Q2

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Recession Deepens in Bulgaria in Q2

Bulgaria's economy shrank 4.8 percent year-on-year in the second quarter, data showed on Monday, accentuating a 3.5 percent first quarter contraction and signalling more pain ahead for the EU's poorest country.

Other emerging European economies last week also registered deep second quarter contractions, underscoring the steep climb they face back to recovery even as EU majors France and Germany show signs of improvement.

Many analysts say Bulgaria will be forced to seek aid from the International Monetary Fund after Latvia, Hungary and Romania, to support its public finances and protect an economy seen contracting by 6-7 percent this year.

The statistics office's flash estimate data showed the Balkan country's exports shrank 18.8 percent year-on-year in the second quarter from a 17.4 percent drop in the previous three months. Imports contracted by 26.9 percent.

Consumption, which had previously thrived and had been the key driver behind booming growth over the past 5-6 years, plunged by an annual 6.3 percent in the second quarter from a 5.4 percent drop in the first quarter, as banks curbed lending.

Industrial output shrank 9.8 percent from April to June from a 12.4 percent contraction in the previous quarter, while agriculture dropped 6.6 percent. The growth of services slowed to 0.3 percent from a 2.5 percent rise in the second quarter.

Investment shrank by 13.9 percent in April-June after dropping 14.1 percent in the first quarter of 2009.

The statistics office will publish detailed data on Q2 gross domestic product on Sept. 10.

The global downturn put an end to 12 years of growth in Bulgaria as cheap credit evaporated, foreign investors fled emerging economies and exports plunged.

The economy grew by 7.1 percent in real terms from April through June of 2008.

The centre-right GERB party, which won July elections, earlier this month slashed budget spending and announced measures to boost revenues hit by the recession, in an effort to avoid an end-year deficit.

Analysts say a budget gap could put pressure on Bulgaria's lev currency peg to the euro. Sofia operates under a currency board regime, which curtails central bank operations, leaving fiscal policy as its only tool to influence the economy.

Source: Forbes

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