Bulgaria Will See Much Lower FDI in 2008 - Govt Official

“My optimistic forecast is that we will end this year with foreign direct investment from around four and a half billion to five billion euro,” InvestBulgaria's head Stoyan Stalev said on Bulgaria’s national radio.

For the first time in years, the reduced FDI inflow will not cover the current account gap of the country, he added.

Bulgaria's current account deficit through August widened to a preliminary 14% of the gross domestic product (GDP) projected for 2008, or 4.77 billion euro, from 11.6% in the same period a year earlier, central bank data showed last week. Meanwhile, the country saw a 28.2% drop in FDI to 2.98 billion euro for the same period, which covered only 62.5% of the current account deficit, compared to 123.7% a year earlier.

Bulgaria, which has had two-digit current account deficits in the past several years, operates a currency board regime that prevents the central bank from intervening in the market, and sticks to rigid fiscal policies in order to offset external shocks.

Bulgarian exports to some traditional markets in western Europe will reduce in view of the narrowing demand in certain sectors like car manufacturing, and the domestic business should look east to find alternative markets, Stalev said.

The crisis, however, can also have positive effects on the country, he added, in view of the favourable tax environment.

Stalev said that real estate and financial services remained most interesting for investors, but were lowering in volumes, unlike investments in production, which were on the rsie.

He expressed no concern about a possible wave of unemployment in the country.

($ = 0.7627 euro)