Eurobank: Bulgaria Economy to Shrink 0.3% in 2010, Grow 2.5% in 2011

The real estate and construction sectors are no longer the drivers of Bulgaria's economy. Photo by BGNES

The Bulgarian economy will contract by 0.3% this year and grow by 2.5% in 2011, according to Bulgaria's Postbank, controlled by Greek EFG Eurobank.

The bank projects Bulgaria's inflation rate to reach 3% this year and mark a slight decrease to 2.7% in 2011.

"The real estate and construction sectors are no longer the drivers of Bulgaria's economy. Exports and tourism are the leading sectors now," says Anthony Hassiotis, the Country Manager for the six affiliated companies of the Eurobank EFG Group in Bulgaria and Chief Executive Officer of Postbank.

Bulgaria's seasonally adjusted gross domestic product marked an increase of 0.5% in the second quarter compared to the first three months of the year thanks to a rise in exports, pulling the country out of recession.

This was the first time that Bulgaria's GDP expanded since the recession set in at the end of 2008 and the beginning of 2009.

Bulgaria, the European Union's poorest country, faced its first recession in 12 years after a three-year lending boom stalled and foreign investments dried up.

The recovery of the Bulgarian economy, which operates in a currency board regime, is lagging behind that of other Eastern European countries. The government has pledged to stick to a tight fiscal policy and keep the deficit below 3 % by the end of this year.

The cabinet adopted earlier this year a package of austerity measures, freezing public pays and pensions in a bid to reduce the bloating deficit.

It revised up to 1% its economic growth forecast for this year, pinning its hopes on a boost in exports.

At the beginning of October the International Monetary Fund wrapped up its two-week review and projected Bulgaria's economy to grow from 0% to 0.4% in 2010 and 2% in 2011.

It said this year's inflation will be moderate, while the current account deficit is expected to fall below 3% of gross domestic product.

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.

Analysts from local think-tanks have warned that 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.

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