Home > Bulgarian Economy > Bulgaria’s 2008 C/A Gap Seen Widening to up to 23.4%/GDP, Narrowing in 2009

Bulgaria’s 2008 C/A Gap Seen Widening to up to 23.4%/GDP, Narrowing in 2009

Bulgaria’s current account gap for 2008 is seen widening to up to 23.4% of the country’s gross domestic product (GDP) before it narrows in 2009 on lower trade deficit and tightened external financing, analysts polled by SeeNews said.

The country’s current account deficit through November widened to a preliminary 21.9% of the GDP projected for 2008 from a revised 18.6% of GDP in the same period a year earlier, according to latest data available. The current account gap rose to 7.465 billion euro ($9.68 billion) through November.

In 2007, Bulgaria’s current account gap was 21.8% of GDP, up from 17.8% a year earlier.

The country’s central bank is due to release on Friday the end-2008 current account figures.

Agata Urbanska, an Emerging Europe senior economist with ING Bank, London, said she sees the shortfall on Bulgaria’s current account reaching 23.4% of GDP as there will be generally moderate negative adjustments across most components of the current account that have cumulated in current account deficit widening.

The main factors explaining the rise in the country’s current account deficit last year include the widening of the trade gap, the negative income balance as well as the decline of the surplus on the services account between 2007 and 2008, Urbanska told SeeNews, adding that only current transfers surplus increased last year.

The Sofia-based Centre for Economic Development (CED) expects the country’s current account deficit for the whole of 2008 widening only a little, to some 22-23% of GDP, due to broadening trade deficit and rising outflow of foreign investments.

“The reason for the widening current account gap for 2008 is the increase of imports due to surging energy and raw material prices, and not a decline in exports, whose share remains at 66.8% of GDP, unchanged from 2007,” CED said in a report released earlier this week.

According to BNP Paribas analyst Michal Dybula, the shortfall on the current account “will be still high.” He sees the current account deficit for 2008 at some 21.9%.

“The real thing is that the relative domestic demand has been way stronger than in the major trading partner economies and basically the tendency we have observed in the first nine months of the year are pretty likely to contribute to a higher current account deficit figure for the full year,” Dybula told SeeNews.

“Though I do believe that with a growing let’s say inability to refinance this external deficit […] we would see a deceleration of the current account deficit,” he said.


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