[size=85:2vj2mtyj]novinite 11 June 2010

Bulgaria to Stay in Recession by End-2010 - Analyst

Bulgaria’s economy is likely to continue to contract in the second half of this year and may fail to return to growth earlier than next year, an analyst from a local think-tank forecast.

"
Bulgaria's economy will not manage to bottom out of recession by the end of the year unless the government takes measures for spending cuts and improvement of the business climate,"
Georgi Angelov, Senior Economist at the Open Society Institute Sofia, told Darik radio on Friday.

In his words the revised forecast of the Bulgarian government for a 1% growth is the most optimistic scenario that can unfold.

“Changes should be made in the methodology of calculating revenues and spendings in the budget,” Angelov said and recommended that Bulgaria adopt the European accounting rules, rather than the method on a cash basis.

"
There is no information about spendings under EU accounting rules,"
he said.

Bulgaria, the European Union’s poorest country, is currently going through its first recession in 12 years after a three-year lending boom stalled and foreign investment dried up.

The fall of Bulgaria's gross domestic product (GDP) slowed to 3.6% on an annual basis in the first quarter of 2010 from 5,9% in the previous quarter, data showed on Wednesday.

The National Statistics Institute has revised up the figures about the decline of Bulgaria's economy after its flash estimates from the middle of May set the percentage at 4%.

Even though the revised statistics show slower contraction of the Bulgarian economy, it marks one of the sharpest fall in GDP among European Union member states - the country is preceded only by Latvia, whose economy contracted last year by the record-high 15%.

Bulgaria's government has revised up to 1% its economic growth forecast for this year as recovering exports bolster the expansion.

Prime Minister Boyko Borisov’s government previously estimated the economy would grow 0.3% after a 5.1% contraction in 2009 as investments dwindled and consumption shrank.

The European Commission said last month that Bulgaria’s economy is likely to start to recover towards the end of 2010 under the impact of the international cycle.

Bulgaria's budget deficit increased to BGN 1.67 B in the first three months of 2010 due to a fall in revenues and a rise in spending for social payments.

The total gap for the first quarter accounted for 2.4% of the country’s gross domestic product (GDP), based on the government's latest forecast for 2010 GDP. The deficit grew by BGN 270 M in March alone.

Despite pledges to stick to a strict fiscal policy, the government has adopted a draft bill for 2010 that targets a deficit of 4.8% of GDP on a cash basis and 3.9% of GDP under EU accounting rules, far wider than initial estimates.

Among other things, the budget revision would allow the government to reach into Bulgaria's fiscal reserve, setting a minimum of BGN 4.5 B at the end of the year.