Raiffeisenbank: Eurozone Recession Casts Shadow on Bulgaria

According to "Raiffeisenbak Bulgaria" analysts, in 2011, there was a serious decline in the net direct foreign investment - from EUR 1.6 B in 2010 to EUR 940 M. File photo

The recession in the Eurozone, which is already a fact, according to "Eurostat", the statistical office of the EU, is casting a shadow on the Bulgarian economy.

In the last months of 2011, many sectors registered a decline in their production; profits, employment and investments are falling, according to findings in the monthly macroeconomic analysis of "Raiffeisenbank Bulgaria" for January 2012.

"Households and businesses are undoubtedly influenced by the continuing flow of negative information coming from Europe and the decline in employment and rising unemployment further aggravate the condition of the weak domestic market," said the Banks Chief Economist, Kaloyan Ganev.

"Raiffeisenbank Bulgaria" notes that in the last quarter of 2011, economic growth slowed greatly - to just 0.3% annually, and the Gross Domestic Product GDP annual growth of 1.7% is below the expectations of the bank, which predicted 2% in an earlier forecast.

The publication points out that the reduction of employees by 15.4 thousand people last year is fully borne by the private sector, while the public one has even increased slightly.

According to the Bank's analysts, in 2011, there was a serious decline in the net direct foreign investments - from EUR 1.6 B in 2010 to EUR 940 M.

In January 2012, banks have deposited abroad BGN 1 B because of very limited investment opportunities in Bulgaria, the report of "Raiffeisenbank Bulgaria" explains.

After a temporary decline of bad and restructured loans in December 2011, in January 2012 they continued to increase, and their share reached 22.3% of all gross loans, according to the analysis.

The government's fiscal reserves at the end of January is BGN 4 B and the report forecasts that by year's end it will fail to return to the  minimum level required by law. In view of the budget deficit for the year and the pending payment of EUR 818 M in foreign debt on January 15, 2013, a more active policy of issuing public debt by the government is expected, and entering the international Eurobond markets in the coming months cannot be ruled out, analysts predict.

The report notes the achievement of a better budget deficit than the projected fiscal target, and the good performance of the current account, which for the first time since 1997 registers surplus.

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