ECONOMY OF BULGARIA - October 2008

In the period before the expansion of the global financial crisis, Bulgaria realize higher economic growth for the second quarter of 2008, despite the apparent slowdown of growth in consumption and investment. Continue the trend of earlier periods of increased growth of exports of goods and services and delay the growth of imports. Accelerated rise in value added services, growth in industry slowed down, but remains among the leading economic sectors.
In the third quarter business climate remained on high levels, but there is little consistent trend of decrease.The confidence of consumers changes - rising pessimism about the current and expected development of the economic situation.

The dynamics of supply and demand by half of the year and in short-term data to September have reason to expect during the third quarter overall higher economic growth compared with growth during years ago. We expect the recovery of agriculture to continue, while growth in industry and services will be delayed compared with years ago. Throughout 2008 also expect a higher growth compared to last year, but in 2009 we expect a slowdown.

Deterioration of the current account deficit by 47 percent over the deficit for the same period last year almost entirely due to the increasing deficit in trade balance, mainly due to increased energy prices. Meanwhile growing imports of investment goods shows that local and foreign investors do not expect a crisis in manufacturing. FDI flows remained relatively stable despite the financial crisis and the negative report of the EU.

Among the users continue to register worrying inflation expectations and feelings. On the other hand, stands out the presence of domestic inflationary pressure from the business for the movement in prices until the end of 2008. By the end of the year we can expect to gain inflation in the range 8-9 percent.

Employment continues to grow. Total unemployment decreased, but the youth is growing, while significantly reducing long-term unemployed. The registered unemployment also continues to decline. However, growth in productivity is only accelerating in the first quarter and slowed in the second quarter compared with the growth years ago, which is an indication of some deterioration in overall economic growth, which for the second quarter also slowed on an annual basis.

There is still no serious improvement in business environment. Still working on the simplification, administered locally. Regarding corruption is a deterioration found in the report of the Commission in July and the report "Index of perception of corruption for 2008" by "Transparency International", which defines our country as the most corrupt among 31 countries of EU and Western Europe. Positive changes in business environment are the introduction of the electronic commercial register and the significant easing of procedures for starting businesses.

The future will show us which will be the new export strategy of the country.
Continue deliberations on the allocation of the security burden between workers, employers and the state budget, which should take effect next year. The main change remains the participation of the state with a fixed rate.

Money supply in August 2008 will grow but at a slower pace. Interest rates on all loans accelerated its pace right about 1 percentage point. Seeing some slowdown in the rate of increase as in deposits in foreign currency and deposits in EUR.

Banking system marks at the end of July sufficient coverage of liquidity. However, in its annual report for 2007 Deposit Insurance Fund finds that there are signs of future problems with some of the claims of the vault. Its main message is to alert banks about the too risky loans.

Supply of residential property exceeding demand in the range of one and a half - twice times. The increased interest on the loans will influence the housing markets. Financing the purchase of existing properties will be increasingly difficult. In the holiday sale offering multiple exceeds demand, there is stagnation in the segment and investment in the so-called "second home" seems to be the most risky. The trend for the development of shopping centers remains stable not only in the big cities but also in the small towns. The prices of commercial areas so far remained stable.

In response to criticism of the European Commission, the Government adopted a detailed report and plan to overcome problems in dealing with European funds. Positive points in the report are related to changes in the Public Procurement Act aimed at greater transparency, measures to strengthen the administrative capacity of civil servants have proposed, have developed concrete measures to significantly improve management of funds OP "Transport" and OP "Regional Development". "The report has, however, moments that are not sufficiently clear - no deadlines for adopting changes in legislation, lack specific measures for cooperation with the prosecution, provided excessive centralization of operations planning, management, monitoring and control of EU funds, lacking measures to ensure the independence of executive agencies, absent measures to improve coordination between ministries, between central, regional and local authorities.
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Source: Center for Economic Development and "Manager" Magazine