Alarm Raised over Bulgaria's Stagnant Economy

Bulgarians are still waiting for the expected jump in incomes and living standards they were promised before the country’s accession to the European Union. Photo by Sofia Photo Agency

Bulgaria's economy is struggling to survive another difficult year, when it will mark an anemic growth at best in the wake of the slump in the euro zone, Sofia-based think-tanks have warned.

Bulgarian analysts from Industry Watch, the Center for Economic Development and Elana brokerage company, have cut their growth forecast for 2012 to just 0-1% instead of the previously forecast 1.5%, citing slumping exports and stagnant domestic demand.

The central bank BNB estimated Bulgaria's economic growth to slow-down to 0.7% in 2012, citing the sovereign-debt crisis in the euro area.

Bulgaria's economy expanded by 1.7% in 2011.

The European Bank for Reconstruction and Development revised earlier this month downwards its forecast for Bulgaria's economic growth to 1.7% in 2013 due to slumping exports.

The bank cut its forecast for economic growth from 2.5%  in the previous report published in May.

Bulgaria's economy is expected to expand by 1.2% in 2012, EBRD said.

"Recovery is expected to continue to be modest in Bulgaria into 2012, in contrast to earlier projections of vigorous growth, due to sluggish export demand. However, the government continues to adhere to fiscal prudence, with the government budget marginally in surplus in the first five months of the year," EBRD latest Regional Economic Prospects report said.

EBRD praised Bulgaria's government decision to tap international financial markets earlier this month, saying that it "accessed capital markets in July 2012 on favorable terms, with a five-year EUR 950 M eurobond being heavily oversubscribed and achieving a yield of 4.25%."

The European Commission revised sharply downwards its forecast for Bulgaria's economy in the middle of May, estimating it is to grow just 0.5% this year.

The European Union executive previously estimated that the economy of the Balkan country will grow 1.4% this year due to worsening growth prospects in key trading partners across Europe and stagnant domestic demand.

Tumbling levels of exports and industrial production show that Bulgaria's economy is already feeling the chill from the euro zone, according to the experts, who also cite the worsening financial results of major public companies.

This has left domestic demand as the major driving factor behind the economy, but expectations are that it will remain subdued due to a rising unemployment rate and a drop in investments.

Exports, which used to be the driver behind Bulgaria's recovery, are slumping and in the best possible scenario can record a negligible growth or remain flattish, according to analysts' forecasts.

A mix of global slow-down, restricted financing and withdrawing investors have brought Bulgaria's construction sector to a stalemate and according to the analysts it has been sliding ever more firmly into negative territory for the fourth year in a row with little hope for revival in the short term.

Bulgaria's retail market continues to be on a downward trend, despite the retail concentration within malls, which have taken the role of new urban shopping, and leisure centers over the last couple of years.

The only hopes have been pinned on the tourism and agriculture sectors, which performed well in June, but they would hardly be able to push economic growth up to 1%.

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