[size=75:7enq6bgl]novinite 10 March 2010

EIU: Recession, Greek Crisis Stumble Bulgaria's Economy

he recession in Bulgaria's main trading partners and the Greek crisis will be among the major obstacles that Bulgaria's economy will face in the short term, a report of the Economist Intelligence Unit (EIU) says.

According to the experts for the time being concerns over Bulgaria's competitiveness could hardly trigger the dismantling of the Currency Board that keeps the Bulgarian currency at 1.9558 to the euro.

The report points out that the weak demand on the market of the EU member states will limit the exports of Bulgarian goods and services, but considerable changes are not expected in the levels of the current account deficit in 2010 and the year after.

According to EIU the current account deficit will stand at an average of 6,8% of GDP by the end of 2011, driven mainly by the trade deficit. The Economist's analytical unit projects inflation at about 2,2% in 2010 and 2,5% in 2011. Bulgaria's economic growth has been set at 0,6%.

Prior to the economic crisis Bulgaria was among the countries with the highest inflation in the European Union, but due to the recession, prices in Bulgaria and across Europe started falling.

Statistics office data recently showed that the harmonized index of consumer prices rose 1,8% on a yearly basis in January and was up 0.6% on a monthly basis.

The experts forecast that the crisis in Greece will probably hurt Bulgaria regarding its trade contacts, investments and the Greek banks.

The foreign analysts also warn that the deteriorating debt crisis in Greece and the Greek banks, which hold nearly 30% of the Bulgarian banking sector, may trigger funds outflow from Greek bank subsidiaries in the country to headquarters in Greece.

Bulgaria's central bank has recently assuaged fears over funds outflow from Greek bank subsidiaries in the country to headquarters in Greece, saying this is part of the free movement of capital

“There is no liquidity withdrawal from Greek banks subsidiaries in Bulgaria,” representatives of the Bulgarian National Bank commented last week.

Most of the bankers that manage the Greeks banks subsidiaries in Bulgaria have also denied that the Greek mother-banks were draining funds from their Bulgarian units.

Some of the biggest lenders in Bulgaria are managed by Italy's UniCredit, Greece's National Bank of Greece, Hungary's OTP and Austria's Raiffeisen.

Other Greek banks present in Bulgaria include EFG Eurobank, Piraeus, Emporiki and Alpha Bank.