“For this year we expect it to be around 6.5% and the [government's] forecast for growth slowing by two percentage points [in 2009] is an acceptable scenario at this stage,” CED co-chairman, Georgi Prohaski, told a news conference.
The government expects the country’s economy to grow by a real 4.7% next year, down 1.5 percentage points from its forecast for this year.
Prohaski said that the global economic crisis has already started to take its toll on the Bulgarian economy, but the strong growth in agricultural sector will help compensate for the poorer performance of the construction and real estate sectors this year.
He added that the country’s economy will be affected by the global crisis in the form of lower foreign direct investment [FDI] and also because of the foreign ownership of most local banks, and lower demand for Bulgarian exports.
"In case of a sharp drop of foreign investments [next year] there will be a sharp drop in the current account deficit and a lower economic growth,” he said.
Bulgaria, which has had two-digit current account deficits in the past several years, relies on high foreign capital inflows to offset the shortfall. The country ended 2007 with a current account gap equivalent to 21.8% of the GDP, and the government expects a similar deficit this year.
“The [FDI] forecast for the end of this year is around the last year’s level. There is no risk for a sharp drop, for next year, however, the issue remains open,” Alexander Bozhkov, CED co-chairman told the same news conference. “In any case, they [FDI] will be lower next year.”
The government's investment promotion agency said earlier this month that the Bulgaria will attract 4.5 billion euro to 5.0 billion euro in FDI this year, much lower than the record-high 6.5 billion euro in 2007.
Prohaski said that the current account deficit is expected to be 23-24% of GDP this year and that it would start decreasing as a percentage of GDP next year because of falling oil prices, among other reasons.
Lower oil prices and bumper harvests will help slow inflation to 8.0%-9.0% this year from 12.5% last year, Prohaski said.
“We think that in the current situation and given the stabilisation in agriculture, there are no reasons for inflation to be higher than 5.0% next year,” he said.
The government expects inflation to slow to 5.4% in 2009.
