Economic growth in Bulgaria accelerated in 2006 and will peak this year, underlined by continued high levels of foreign direct investment, which will stay above 10% of gross domestic product (GDP) for a fifth straight year, a report by Bank Austria Creditanstalt (BA-CA) showed.

But the sustainable increase in export growth will be offset by higher gas prices and the inflow of investment, which will lead to another year of high current account deficit, BA-CA's central and eastern European quarterly report forecast.

The bank's experts anticipate that Bulgaria's GDP to grow by 6,5% this year to EUR 27,5 B and the per-capita figure will rise to EUR 3,590.

Annual inflation will fall to 5,2% at the end of 2007, significantly above the government target of 3,1%.

But BA-CA believes that Bulgaria has good prospects for joining the ERM II mechanism, the euro's waiting-room, in the first half of the year.