ECONOMISTS FORECAST SOME 3.8% GDP GROWTH IN 2011

Bulgaria’s economy will grow by 3.8% this year and by 4.7% in 2012, according to economists from the Agency for Economic Analyses and Forecasts. Inflation will be reduced to 3.8%, the rising prices of foodstuffs and fuels being the main factor for it.

Unemployment is expected to rise slightly, reaching levels above 10%, predicted Stefan Tsvetkov, Chairman of the agency. The experts also forecast that Bulgaria’s budget deficit will be reduced to below 3% of GDP.

Investments are expected to grow by 5.8% this year and consumption – by 1.9%. Foreign direct investment in Bulgaria is forecast at around €1.5 bn. The recovery of consumption will be more tangible in 2012 with the improvement of the labour market. 2012 inflation is expected to go down to 3%. Credit growth will speed up to 7.4% and 9.7% this year and in 2012, respectively.

According to the experts, there is a risk of a possible pre-election upward pressure on expenditures.

“The second internal risk, which is still unknown to us, is the state of the banking system. The share of bad loans in our banking system is still rising. However, there are some signs that this increase is slowing down and may soon stop. The easiest way to stop the growth in the share of bad loans is through improving lending activity. We believe that banks are very interested in starting lending. However, they are very conservative when it comes to reducing the interest rates on credits,” specified Tsvetkov. The economists also predicted a gradual slow-down in the dynamics of exports and a persistent recovery of imports. Thus, the contribution of the external sector to our country’s economy will slow down this next year and will remain negative in 2012.