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Hard landing is unlikely for the Bulgarian economy
submited on 25.06.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 25.06.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
With respect to the forecasts of slowing growth the Bulgarian economy continues to expand at stable rates. And despite pessimistic expectations of some analysts, especially in the context of the current problems of the three Baltic economies (Estonia, Lithuania and Latvia) hard landing for Bulgaria remains for now unlikely. Factors, supporting expectations for keeping stable economic growth, are the following.
Investment activity remained stable, which preconditions rapid growth.
Bulgaria continues to attract substantial foreign investments regardless of the more notable negative impact of the global financial turmoil.
The real estate market remains attractive investment alternative and keeps on attracting external capital.
We do not have reasons to believe that in the medium term serious shock for the economy could occur stemming from the investment inflows, allocated to Bulgaria.
Both internal and external demand will remain factors, supporting the GDP growth. Obvious also from the statistical data, for a second consecutive export grows faster than import. For now we do not believe that rapid consumer price inflation in recent months preconditions significant risks before the monetary and financial stability in the country.
There are no signs for systematic risks before the Bulgarian banking system, emerging from the ongoing relatively fast credit growth. It is unlikely to witness large-scale withdrawal of financial resource from the banking system such as the development in Estonia – at least because the foreign property in the Bulgarian banking system is well diversified and the corresponding headquarters have not suffered substantial losses from the financial markets’ turmoil.
There are however risks before economic activity. Systemic risks for the economy stem not from the expanding trade deficit, inflation and potential sharp hikes of international prices, but rather from the lack of will for completing the necessary structural reforms.
Investment activity remained stable, which preconditions rapid growth.
Bulgaria continues to attract substantial foreign investments regardless of the more notable negative impact of the global financial turmoil.
The real estate market remains attractive investment alternative and keeps on attracting external capital.
We do not have reasons to believe that in the medium term serious shock for the economy could occur stemming from the investment inflows, allocated to Bulgaria.
Both internal and external demand will remain factors, supporting the GDP growth. Obvious also from the statistical data, for a second consecutive export grows faster than import. For now we do not believe that rapid consumer price inflation in recent months preconditions significant risks before the monetary and financial stability in the country.
There are no signs for systematic risks before the Bulgarian banking system, emerging from the ongoing relatively fast credit growth. It is unlikely to witness large-scale withdrawal of financial resource from the banking system such as the development in Estonia – at least because the foreign property in the Bulgarian banking system is well diversified and the corresponding headquarters have not suffered substantial losses from the financial markets’ turmoil.
There are however risks before economic activity. Systemic risks for the economy stem not from the expanding trade deficit, inflation and potential sharp hikes of international prices, but rather from the lack of will for completing the necessary structural reforms.
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