Macroeconomic Forecast Bulgaria

Bulgaria's current account deficit widened by 31.0% y-o-y during the first six months of 2008 to reach EUR3.8bn from EUR2.9bn for the same period a year earlier. The main factor behind the deterioration in the current account was a widening in the goods trade deficit which expanded to EUR4.3bn between January-June, significantly higher than the EUR3.3bn shortfall recorded in H107. We maintain our view that Bulgaria's current account deficit is set to expand further this year, with the full-year shortfall expected to come in at EUR7.0bn (21.3% of GDP). Underpinning our belief that a substantial contraction of the deficit is unlikely in the medium term is the ongoing slowdown in the eurozone, combined with persistently high inflation which will continue to weigh on Bulgaria's export competitiveness.

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