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Sep 12, 2007 14:29 EEST
(adds details, background)</p>SOFIA
September 12 (SeeNews) - A broadening trade gap increased Bulgaria's current account deficit through July to a preliminary 11.4% of the projected gross domestic product (GDP) for 2007 from 7.2% a year earlier, central bank data showed on Wednesday.
The external account balance for the first seven months of 2007 showed a deficit of more than 3.0 billion euro ($4.2 billion), up from 1.8 billion euro in the year-ago period, the central bank said in a statement.
The country's trade deficit through July widened to almost 3.9 billion euro from 2.7 billion euro in the first seven months of 2006, as imports grew faster than exports.
The country, which joined the EU on January 1, had imports of 11.3 billion euro in the first seven months of 2007, up 18.8% on the year, while exports were 8.6% higher at 7.4 billion euro.
Last year, the country's trade gap widened over 22% to 5.4 billion euro, pushing the current account deficit to a record high 15.8% of GDP from 12% for 2005. Analysts have said that expect the trend to accelerate due to expanding domestic consumption and the government's plans to boost social spending and cut income tax.
The government in Sofia has recently raised pensions and salaries in the public sector. It plans to introduce a flat tax of 10% on personal incomes from the beginning of next year, replacing the current system of progressive taxation and seeking to lure more foreign direct investments (FDI).
Bulgaria relies on FDI to finance its ballooning current account deficit expected to reach up to 18% of the projected GDP this year. FDI for the current year is forecast to exceed the record high of 4.1 billion euro attracted in 2006.
Foreign investment in Bulgaria through July rose 14.2% on the year to some 2.7 billion euro. Foreign cash inflows covered 87.7% of the current account deficit in the first seven months of 2007, versus 129.4% a year earlier.
The International Monetary Fund and the European Commission have forecast that Bulgaria’s current account gap will widen to 16.6% this year.
($ = 0.7212)
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