Bulgaria was hit hard by the crisis in 2009, with GDP contracting by 5.6 per cent, and despite initial hopes the economy grew only 0.3 per cent in 2010, a very weak recovery, the Ernst & Young consulting firm says in a report. But the disappointing result last year was in large part due to a steep 3.2 per cent decline in GDP in Q4 2009 - quarterly growth actually averaged 0.9 per cent in 2010.
However, GDP rose just 0.5 per cent in Q1 2011, lower than the 2010 average, due to very weak private and public consumption, although exports continued to rise strongly with quarterly growth of 4.6 per cent. (Source: BTA)
"We forecast GDP growth of 3.2% in 2011, before picking up to 4.8% in 2012 and 5.6% in 2013. These good prospects are partly based on the large catch-up potential of the Bulgarian economy and its strong pre-crisis performance," says the forecast provided to Novinite.com (Sofia News Agency) by Ernst & Young Bulgaria.
The report of the global consultancy reminds that Bulgaria was hit hard by the crisis in 2009, with GDP contracting by 5.6%, and despite initial hopes the economy grew only 0.3% in 2010, "a very weak recovery." It says that the disappointing result last year was in large part due to a steep 3.2% decline in GDP in Q4 2009 - quarterly growth actually averaged 0.9% in 2010. However, GDP rose just 0.5% in Q1 2011, lower than the 2010 average, due to very weak private and public consumption, although exports continued to rise strongly with quarterly growth of 4.6%.
In spite of its optimistic forecast for the Bulgarian economy in the next three years - growth of 3.2% in 2011, 4.8% in 2012, and 5.6% in 2013 - which in the longer run is even more optimistic than the prognosis of the Bulgarian Finance Ministry (3.6% in 2011, 4.1% in 2012, 4% in 2013), Ernst & Young has warned that "risks to the forecast remain skewed to the downside, stemming mainly from uncertainties about external developments."
"These particularly relate to increased turbulence on European sovereign debt markets, with a restructuring of Greek sovereign debt looking increasingly likely. Unless this is handled well by the European authorities, then the repercussions for the EU could be severe. An uncoordinated Greek debt restructuring could lead to a considerable tightening of credit provision throughout the Eurozone, with the impact in Bulgaria being felt both via increased stress in its banking sector and via reduced demand for its exports," the global consultancy warns.
It points out that a further negative impact for Bulgaria could be a severe delay in the recovery of FDI, noting that since global liquidity evaporated, Bulgaria's FDI inflows plunged from 30% of GDP in 2007 to just 4.5% of GDP in 2010, and there was a small net outflow in Q1 2011. The forecast points out that given limited global appetite for risk, it is unlikely that Bulgaria's FDI inflows will approach pre-crisis levels again for some time. Further tightening following an uncoordinated Greek debt restructuring would delay any recovery of FDI, in turn holding back the recovery in Bulgaria.
With respect to the Eurozone, in its Summer Forecast, Ernst & Young stresses that sovereign debt concerns overshadow modest Eurozone recovery. /Source: Sofia News Agency/