Industry Watch: GDP Growth at 6.2% in 2008

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Industry Watch: GDP Growth at 6.2% in 2008

Bulgarian economic think tank Industry Watch predicts that Bulgaria's gross domestic product (GDP) will grow 6.2 per cent in 2008 and 6.4 per cent in 2009, BTA reported.

In the autumn of 2006 Industry Watch predicted 6.0 per cent GDP growth in 2007, which proved only 0.2 percentage points lower than the rate announced by the National Statistical Institute a year and a half later.

The macroeconomists involved in these forecasts dismiss fears of an "overheating" of the Bulgarian economy. According to the experts, the expected faster inflation of consumer prices does not pose a risk for the country's monetary and financial stability, and there are no systemic risks for the banking system caused by the relatively rapid credit growth.

Industry Watch expects that the trade deficit will continue to increase - a process which is largely due to the increase in the flow of foreign capital into the economy. Total investment (domestic and foreign) will continue to grow in real terms by 14-20 per cent. The systemic risks for the economy do not arise from the trade deficit but rather from the lack of a political will for structural reforms and improvement of the business environment and the judicial system.

The fiscal surplus will be considerable in 2008, at 3.2 per cent of GDP. The government continues to collect more money than it needs by law, arguing that this is a policy against the current account deficit. This limits the chances of faster accumulation of capital in the economy, according to Industry Watch.

The government will be under pressure to spend the tax revenue surplus for election campaign purposes, which will run counter to the political promise for a public expenditure ceiling of 40 per cent of GDP.

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