June 18 (SeeNews) - Improved harvests in Bulgaria and Romania will boost their economies this year amidst a general regional scenario of slowing economic growth, the World Bank said on Wednesday.
"A much better harvest in 2008 than last year, as is now likely, may well lead to faster growth in Bulgaria and should support the likely pickup in Romania," the bank said in its EU10 Regular Economic Report.
Both Bulgaria and Romania reported higher-than-expected economic growth in the first quarter of the year. Bulgaria's economy grew by a real 7.0% on the year, compared to 5.5% in the first quarter of 2007, and Romania recorded record high economic growth of 8.2% versus 6.1% in the first quarter of last year.
The EU10 report monitors macroeconomic and reform developments in the EU10 countries - EU newcomers Bulgaria and Romania, which joined the bloc in 2007, plus EU members since 2004 - Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia and the Czech Republic.
The EU10 countries have adjusted "relatively well" to the ongoing global financial turmoil, rising inflation and commodity prices and in a climate for weak economic growth in mature markets, the bank said in the report.
Although economic expansion in most EU countries is set to slow in 2008, led by substantially slower economic activity in Estonia, Latvia, and Lithuania, the overall pace has remained reasonably robust. Economic growth, moreover, should be broadly unchanged in Bulgaria and Poland this year, and should pick up in Hungary and Romania, it added.
"Some cooling down of economic activity is welcome [...] given the imbalances in some countries of large current account deficits and external debt, and high and rising inflation," the report's principal author Ivailo Izvorski said.
High inflation which has risen substantially in part because of rising global food and energy prices and in part because of buoyant economic expansion ... "is becoming an increasingly important problem, especially for countries with slowing economic expansion."
The World Bank noted that strong revenues and spending restraint have helped improve fiscal positions this year in Bulgaria and Romania.
According to the bank, investments in infrastructure are an essential part of the EU10's growth and convergence strategy and the countries should focus on building national procedures and practices that can strengthen the effective management of public infrastructure resources to use more fully EU funds.
"Strategic planning needs to be closely linked to multi-year fiscal frameworks. Capacity for appraising the economic cost-benefit of projects should improve, while project implementation will need to be supplemented by monitoring capacity and ex-post reviews," it said.