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Dec 17, 2007 20:11 EEST
December 17 (SeeNews) - Bulgaria's economy has grown by a real 6.2%-6.3% in the first nine months of 2007, a tad faster from the year-ago period, thanks to rising domestic demand and strong investments, analysts forecast on Monday.
Three analysts polled by SeeNews aslo said they expected Bulgaria’s gross domestic product (GDP) to have grown by a real 6.0-6.4% year on year in the third quarter, slower than a year earlier. The National Statistics Institute will release the official data on Wednesday.
Bulgaria recorded a revised 6.2% GDP growth in the first nine months of last year and 6.7% year-on-year growth in the third quarter of 2006.
Agata Urbanska, Emerging Europe Economist at ING Bank, expects Bulgarian economic growth to reach 6.3% in the nine months through September and 6.2% in the third quarter of the year.
Desislava Nickolova from Raiffeisen Research, the research department of Austria's Raiffeisen Zentralbank, said she expected Bulgaria’s economy to have grown by 6.2-6.3% in the nine months through September and by 6.0% in the third quarter
Dimitar Chobanov, senior economist with Sofia-based think-tank Institute for Market Economics, expects the EU newcomer’s GDP to have grown by 6.3% in the first nine months of 2007 and by 6.4% for the July-September period, year on year.
“The slowdown in third-quarter growth from the second quarter [when GDP grew by a real 6.6%] is due to inflation data for the third quarter, which will eat up the real growth. […] There was a sharp acceleration of inflation – not only in Bulgaria but also in the region and globally – which was due to the shock of rising food prices,” Nickolova told SeeNews.
Year-on-year, Bulgaria's November consumer price inflation accelerated to 12.6% from 12.4% in October.
Industrial data also indicate a slight decrease of industrial output in the third quarter in comparison with both the third quarter of last year and the second quarter of the current year, said Nickolova and added: "In the third quarter the industrial output will grow 9.8% compared to 10.5% in the second quarter."
“The farm sector will be also a factor for the slowdown of the real growth, as on the one hand it will have impact through prices and inflation, and on the other hand as real product, as gross added value in the gross domestic product,” she added.
Urbanska said domestic demand and investments were likely to have remained the GDP growth drivers in the first nine month of the year. Investments in fixed assets grow strongly and the expected average growth rate for the first nine months of the year is 28%, she said.
“The factors that define economic growth are connected to increased investments and the creation of physical capital which are prerequisites for the improvement of the overall productivity of the economy,” Chobanov told SeeNews.
Bulgaria expects record high foreign direct investments (FDI) of 5.2 billion euro ($7.48 billion) this year, Economy Minister Petar Dimitrov said last month. The country, which joined the European Union on January 1, has attracted large numbers of foreign investors in various sectors of its economy over the last few years, primarily in real estate, tourism, IT, telecommunications and finance. The Black Sea country of 7.7 million people attracted 4.1 billion euro in FDI in 2006.
“On the other side, employment is rising which also helps the growth,” he added.
Bulgaria’s average unemployment rate is expected to fall to some 8.0% this year, below government projections and down from 9.61% last year, Labour and Social Policy Minister Emilia Maslarova said last week. October unemployment rate fell to a 16-year low of 6.73% from 6.78% a month earlier and 8.38% in October 2006.
Bulgaria's GDP grew by a real 6.4% on the year in the first half of 2007, faster than the revised 6.0% rise in the same period of 2006. The country's first-half GDP reached 24.5 billion levs ($18 billion/12.53 billion euro), calculated in current prices. The country’s economy grew by a real 6.6% in the second quarter, compared to 6.2% in the first quarter and to 6.4% in the second quarter of 2006.
Urbanska and Nickolova both expect the country’s economic growth to reach 6.2% for the whole 2007, while Chobanov was the most optimistic of the three polled analysts, predicting a GDP growth of 6.5%.
Bulgaria's economy will sustain its growth in the next couple of years thanks to an expected strong growth of private consumption and despite a possible slowdown in investment activity.
“My forecasts are for maintaining a real economic growth of above six percent in the next couple of years,” Chobanov said.
Urbanska expects private consumption to grow by more than 7.0% in 2008 compared to a projected 6.5% rise in 2007, while investment activity might slow down if investor sentiment is negatively affected by growing external imbalances.
“In a positive scenario 2009/10 should see some cooling of domestic demand and improvement of trade gap so that beyond these years economic growth could remain strong but well balanced,” Urbanska added.
Under a negative scenario, Bulgaria's economic growth will not slow down in the next two to three years and its current account deficit is expected to swell, said Urbanska.
Bulgaria relies on FDI to cover its swelling current account shortfall expected to exceed 20% of gross domestic product this year, up from 15.7% in 2006. The country's current account deficit for the 10 months through October rose to a preliminary 17% of the projected GDP for 2007 from 10.5% a year earlier, latest data showed.
The government in Sofia has projected a real GDP growth of 6.4% in each of 2007 and 2008. Growth is seen accelerating to 6.8% in 2009 and 6.9% in 2010.
The main factors for the acceleration of economic growth will be structural reforms, improving business climate and raising institutions’ efficiency, the government said earlier this month in its three-year programme for convergence with other European Union countries for 2007-2010.
Following are GDP growth forecasts made by the three analysts polled by SeeNews:
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