IMF: Bulgarian Economy in Danger

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IMF: Bulgarian Economy in Danger

Bulgaria may be hit by a financial disaster similar to the one Asia lived through ten years ago, IMF experts warn, adding that the Bulgarian economy is far from flourishing.

Just like in Romania, Serbia and Croatia the macroeconomic indicators in Bulgaria are corresponding to those registered prior to the Korean crisis and the collapse of the Asian markets in 1996. Then, bad credits severely hit the economies of the Asian Tigers. The debts precipitated massive bankruptcies and unprecedented devaluation of Korean currency.

Nowadays, the IMF experts see the signs heralding a similar crisis in Bulgaria. This emerges from a report quoted by the a Croatian daily titled "Vulnerability of the Developing Countries of Southeastern Europe."

The experts are highly concerned over the huge current account deficit, which is expected to reach 20 percent of the country's GDP by end-2007, according to a report by the IMF mission in Bulgaria that finished its work October 16.

The deficit is twice higher than it was in Asia before the crisis and should be curbed urgently.

Bank loans have recently avalanched, housing loans alone have increased by 73 percent, according to statistics released by the Bulgarian National Bank. So far the banking system is steady, but it has to be closely watched.

By the end of the current year the inflation rate in Bulgaria will hit 10 percent in the least. The reasons are rocketing foods and fuels prices coupled with pay rises in the public sector. Wrapped up, it may lead to spiraling inflation.

With this in mind, the IMF insists that wages should be increased in parallel with the increase of labor productivity. Budget'2007 will be fulfilled with a surplus of 3 percent.

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