Банкеръ Weekly

Briefs

GOVERNMENT STUMBLES IN INFLATION

Bulgaria's economy will be growing at slower rates than projected by the Cabinet, experts from Economist Intelligence Unit believe. According to their estimate, the growth of the gross domestic product (GDP) will reach 4.6% by the year-end, and 4.5% in the end of 2007. The forecast of the team of analysts was presented at a business and investment summit organized by The Economist. The two-day event was held in Athens under the heading Greece, Bulgaria and Romania: Strengthening Relations at the Threshold of EU Accession.
The higher inflation rate caused by the leap of oil and oil products' prices worldwide is the main reason for the delay of economic growth, experts from Economist Intelligence Unit point out. Inflation rate will hit 6.8% in end-2006, but will be considerably lower - around 4.3% in 2007. According to expectations, Bulgarians' average incomes will reach 40% of the average in Europe in the end of next year. This indicator is currently below 30 per cent.
The survival of the currency board arrangement in the country is questionable, as well as the possibility for Bulgaria to join the eurozone in 2010, experts claim. The reason is the increasing deficit in the current account of the balance of payments and the fact that the EUR/BGN exchange rate is drifting away from the real one. The Bulgarian lev will appreciate some 6.2% in 2006 and 3.7% in 2007 as a result of the week euro last year and the outlook for the US dollar's depreciation in the 2006-2007 period.
In its political part the report of Economist Intelligence Unit forecasts risks for the survival of the BSP-NMSII-MRF tripartite coalition Cabinet. Preterm parliamentary elections in the country will be an ideal opportunity for the popular independent Sofia Mayor Boiko Borissov to realize his long-time intention and enter the national policy through the recently-minted non-profit organization GERB, whose informal leader he is, the analysts say.
At the forum in Athens Finance Minister Plamen Oresharski reconfirmed the Government's forecast that the economic growth would be 5.3 % in end-2006, 5.85% in 2007, and 6.2 % in 2008. Bulgarian financiers are of the opinion that inflation in the country would reach 7.7% this year but will be dropping down in the years to come, and is expected at 4.4% in 2007 and at 2.8% in 2008.
Premier Sergey Stanishev also questioned the forecasts of Economist Intelligence Unit. A survey of the contents of the international experts reports from the last five years would show that not all their predictions come true, PM Stanishev said.

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