Finance Ministry Expects Economic Recovery as of 2011

Finance Ministry Expects Economic Recovery as of 2011

Drafting the 2010-2013 macroeconomic forecast as part of the fiscal framework for the same period, the Finance Ministry forecast a GDP drop of 6.3 per cent for 2009 and a shrinkage in investments equal to 26.5 per cent of GDP (as against 38.4 per cent for 2008). The document is posted on the website of the Finance Ministry.

In real terms, investments will decline by 30 per cent. Slow wage growth and rising unemployment will affect household incomes negatively. This, combined with a limited availability of loans, will lead to a decrease in household consumption by 4.5 per cent in real terms in 2009.

The measures applied for this purpose will restrict government expenditures by 3 per cent in 2009, reducing general consumption by 4.2 per cent in real terms.

A a result of the contraction of domestic demand, the import of goods and services will be down by 19.5 per cent, and Bulgarian export will fall by 12.3 per cent.

In 2010, Bulgaria's economy is expected to decline by 2 per cent.

Signs of economic animation may be expected in 2011, with exports being the motor of the recovery, the financial experts predict. GDP growth is projected at 3.8 per cent for 2011, at 4.8 per cent for 2012 and at 5 per cent for 2013.

The average exchange rate used in the Financial Ministry's forecast is 1.45 BGN/USD 1.00 for 2009; in 2011 it is expected to be 1.40 BGN/USD 1.00.

General annual inflation is projected at 1.8 per cent by the end of 2009; the average inflation is expected to be 2.3 per cent.

The economic recovery of industrialized countries is expected to begin in 2010. International prices of both energy and non-energy goods will go up. The external factors of inflation will become stronger and lower but positive figures of inflation for food products and energy goods may be expected at the end of 2010. Internal factors will limit the general rise in prices in 2010 as nominal labour costs during that year will not be a pro-inflationary factor, the Finance Ministry experts predict.

Unemployment will increase and wage growth will be lower than production efficiency. The introduction of higher excise duty rates for cigarettes will push up general inflation by 0.4 percentage points by the end of 2010. In 2010, the average annual inflation and inflation at the end of that year is projected at about 2.2 per cent.

According to the macroeconomic forecast of the Finance Ministry, in 2011-2013 Bulgaria may be expected to return to the price dynamic model of the years before 2007.

Source: BTA

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